d946530b_424b-3.htm

Filed Pursuant to Rule 424(b)(3)
Registration No. 333 - 156843
 
 
 
 
$250,000,000
 
Common Shares, Preferred Shares, Debt Securities,
 
Warrants, Purchase Contracts and Units
 
And
 
14,305,599 of our Common Shares and 1,132,500 of our Warrants Offered by Selling Shareholders
 
Through this prospectus, we may periodically offer:
 
(1) our common shares,
 
(2) our preferred shares,
 
(3) our debt securities, including guaranteed debt securities,
 
(4) our warrants,
 
(5) our purchase contracts, and
 
(6) our units.
 
The aggregate offering price of all securities issued under this prospectus, which in no case will exceed the total number of authorized but unissued common shares or preferred shares under our then existing amended and restated articles of incorporation, may not exceed $250.0 million.  In addition, the selling shareholders named in the section “Selling Shareholders” may sell in one or more offerings pursuant to this registration statement up to 14,305,599 of our common shares, which includes up to 1,132,500 of our common shares which may be issued upon the exercise of the warrants and up to 1,132,500 of our warrants that were previously acquired in private transactions. We will not receive any of the proceeds from the sale of either of our common shares or our warrants by the selling shareholders.
 
Our common shares and warrants are currently listed on Nasdaq Global Market under the symbols “SBLK” and “SBLKW,” respectively.
 
The securities issued under this prospectus may be offered directly or through underwriters, agents or dealers.  The names of any underwriters, agents or dealers will be included in a supplement to this prospectus.
 
An investment in these securities involves risks.  See the section entitled “Risk Factors” beginning on page 6 of this prospectus, and other risk factors contained in the applicable prospectus supplement and in the documents incorporated by reference herein and therein.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.
 
The date of this prospectus is February 17, 2009
 
 

 
 

 

TABLE OF CONTENTS
 
 
PROSPECTUS SUMMARY
2
 
RISK FACTORS  
  6
 
RECENT DEVELOPMENTS          
21
  
THE INTERNATIONAL DRY BULK SHIPPING INDUSTRY
30
 
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
41
          
PER SHARE MARKET PRICE INFORMATION
42
 
PER SHARE MARKET PRICE INFORMATION
43
 
USE OF PROCEEDS
44
 
CAPITALIZATION
45
 
ENFORCEMENT OF CIVIL LIABILITIES
46
 
SELLING SHAREHOLDERS
47
 
PLAN OF DISTRIBUTION
49
 
DESCRIPTION OF CAPITAL STOCK
51
 
DESCRIPTION OF OTHER SECURITIES
53
 
EXPENSES
62
 
LEGAL MATTERS
63
 
EXPERTS
64
 
INDUSTRY AND MARKET DATA
65
 
WHERE YOU CAN FIND ADDITIONAL INFORMATION
66
 
INDEX TO AUDITED FINANCIAL STATEMENTS
F-1
 

Unless otherwise indicated, all dollar references in this prospectus are to U.S. dollars and financial information presented in this prospectus that is derived from financial statements incorporated by reference is prepared in accordance with accounting principles generally accepted in the United States.
 
This prospectus is part of a registration statement that we filed with the U.S. Securities and Exchange Commission, or the Commission, using a shelf registration process. Under the shelf registration process, we may sell the common shares, preferred shares, debt securities (and related guarantees), warrants, purchase contracts and units described in this prospectus in one or more offerings up to a total dollar amount of $250.0 million.  In addition, the selling shareholders may sell in one or more offerings pursuant to this registration statement up to 14,305,599 of our common shares and up to 1,132,500 of our warrants that were previously acquired in private transactions.  This prospectus provides you with a general description of the securities we or any selling shareholder may offer. Each time we or a selling shareholder offer securities, we will provide you with a prospectus supplement that will describe the specific amounts, prices and terms of the offered securities. The prospectus supplement may also add, update or change the information contained in this prospectus. You should read carefully both this prospectus and any prospectus supplement, together with the additional information described below.
 
This prospectus does not contain all the information provided in the registration statement we filed with the Commission.  For further information about us or the securities offered hereby, you should refer to that registration statement, which you can obtain from the Commission as described below under “Where You Can Find More Information.”
 
 
 

 

PROSPECTUS SUMMARY
 
Unless we otherwise specify, when used in this prospectus, the terms “Star Bulk Carriers Corp.,” “Star Bulk,” “Company,” “we,” “us,” and “our” refer to Star Bulk Carriers Corp. and its subsidiaries. Our functional currency is in the U.S. dollar as all of our revenues are received in U.S. dollars and a majority of our expenditures are made in U.S. dollars. All references in this prospectus to “$” or “dollars” are to U.S. dollars.
 
Our Company
 
We are an international company providing worldwide transportation of drybulk commodities through our vessel-owning subsidiaries for a broad range of customers of major and minor bulk cargoes including iron ore, coal, grain, cement and fertilizer. We were incorporated in the Marshall Islands on December 13, 2006 as a wholly-owned subsidiary of Star Maritime Acquisition Corp., or Star Maritime. We merged with Star Maritime on November 30, 2007 and commenced operations on December 3, 2007, which was the date we took delivery of our first vessel.
 
We maintain our principal executive offices at 7, Fragoklisias Street, 2nd floor, Maroussi 151 25, Athens, Greece. Our telephone number at that address is 011-30-210-617-8400.
 
Our Fleet
 
We own and operate a fleet of 12 vessels consisting of four Capesize and eight Supramax drybulk carriers with an average age of 9.8 years and a combined cargo carrying capacity of approximately 1.1 million dwt.
 
Our fleet carries a variety of drybulk commodities including coal, iron ore, and grains, or major bulks, as well as bauxite, phosphate, fertilizers and steel products, or minor bulks.  We charter all of our vessels under medium- to long-term time charters with terms of approximately one to five years, other than the Star Sigma, which is currently employed in the spot market and the Star Alpha, which is committed to the first of four scheduled shipments under a contract of affreightment, or COA, expected to commence in the first quarter of 2009. Please see the section of this prospectus entitled "The International Dry Bulk Shipping Industry - Charter Hire Rates" for a detailed description of a COA. We expect the Star Sigma to trade in the spot market until it commences a three year time charter at a gross daily average charter rate of $63,000 beginning in March 2009.
 
The following table represents a list of all of the vessels in our fleet as of February 2, 2009:
 
Vessel Name
Vessel
Type
 
Size
(dwt.)
Year
Built
 
Daily
Gross Hire Rate
Type/
Remaining
Term
Star Alpha (ex A Duckling)(1)
Capesize
   
175,075
 
1992
 
 
    N/A  
COA
Star Beta (ex B Duckling)(2)
Capesize
   
174,691
 
1993
   
$32,500
 
Time charter/1.1 years
                     
 Commencing in February 2009
Star Gamma (ex C Duckling)
Supramax
   
53,098
 
2002
 
 
$38,000 (6)
Time charter/3.0 years
Star Delta (ex F Duckling)(3)  
Supramax
   
52,434 
 
2000 
   
$11,250 
 
Time charter/1.0 year
                     
Commencing in February 2009
Star Epsilon (ex G Duckling)
Supramax
   
52,402
 
2001
 
 
$32,400  
Time charter/5.0 years
Star Zeta (ex I Duckling)
Supramax
   
52,994
 
2003
 
 
$42,500  
Time charter/2.1 years
Star Theta (ex J Duckling)
Supramax
   
52,425
 
2003
 
 
$32,500  
Time charter/0.1 year
Star Kappa (ex E Duckling)
Supramax
   
52,055
 
2001
 
 
$47,800  
Time charter/1.5 years
Star Sigma (ex Sinfonia)(4)  
Capesize
   
184,403 
 
1991 
   
$63,000
(6)
Time charter/3.0 years
                     
 Commencing in March 2009
Star Omicron (ex Nord Wave)
Supramax
   
53,489
 
2005
 
 
$43,000  
Time charter/2.0 years
Star Cosmo (ex Victoria)
Supramax
   
52,247
 
2005
 
 
$39,868 (6) 
Time charter/2.2 years
Star Ypsilon (ex Falcon Cape)
Capesize
   
150,940
 
1991
 
 
$91,932 (6) 
Time charter/2.4 years
Recently Sold
                     
Star Iota (ex Mommy Duckling)(5)
Panamax
   
78,585
 
1983
 
 
$18,000    
 
(1)
The Star Alpha recently underwent unscheduled repairs which resulted in a 25 day off-hire period.  Following the completion of repairs, the Star Alpha was redelivered to us by its charterers approximately one month prior to the earliest redelivery date allowed under the time charter agreement.  Prior to the redelivery, arbitration proceedings had commenced pursuant to separate disputes that had arisen with the charterers of the Star Alpha relating to vessel performance characteristics and hire.  We have notified the charterers of the vessel that we intend to seek additional damages in connection with the early redelivery of the Star Alpha in the current arbitration proceedings.
   
  On January 20, 2009, we entered into a contract of affreightment, or COA, with Companhia Vale do Rio Doce.  Under the terms of the COA, we expect to transport approximately 700,000 metric tons of iron ore between Brazil and China in four separate Capesize vessel shipments with the first shipment scheduled in the first quarter of 2009.  On February 5, 2009, we committed the Star Alpha to the first shipment under the COA.  
   
(2) On February 10, 2009, we entered into a 13 to 15 month time charter agreement for the Star Beta at a gross daily rate of $32,500.  The vessel is expected to be delivered to the new charterer in February 2009. 
   
(3)
On February 2, 2009, we entered into a one year time charter agreement for the Star Delta at a gross daily rate of $11,250.  The vessel is expected to be delivered to the new charterer by mid-February 2009.
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(4)
The Star Sigma, which was on time charter to a Japanese charterer at a gross daily charter rate of $100,000 per day until March 1, 2009 (earliest redelivery), was redelivered to us earlier pursuant to an agreement whereby the charterer agreed to pay the contracted rate less $8,000 per day, which is the approximate operating cost for the vessel, from the date of the actual redelivery in November 2008 through March 1, 2009. We received payment in full and the vessel is currently trading in the spot market at a rate of approximately $14,100 per day, resulting in revenue for the vessel that is effectively higher than it would have been under the original charter at the rate of $100,000. The vessel is scheduled to commence a three year time charter at a gross daily average charter rate of $63,000 beginning in March 2009.
   
(5)
On April 24, 2008, we entered into an agreement to sell Star Iota for gross proceeds of $18.4 million.  We delivered this vessel to its purchasers on October 6, 2008.
   
(6) Calculated by taking the average daily gross hire rate over the term of the charter.
 
Certain Risks
 
Our business depends on our ability to manage a number of risks relating to our industry and our operations. These risks include the following:
 
●  
Cyclical nature of charter hire rates.  The cyclical nature of the drybulk shipping industry and the volatility in charter hire rates for our vessels may affect our ability to successfully charter our vessels in the future or renew existing charters at rates sufficient to allow us to meet our obligations or to pay dividends.  Charter rates are affected by, among other factors, the demand for carriage of drybulk cargo and the supply of drybulk vessels in the global fleet, which, according to Drewry, as of November 2008, amounted to 70.6% of the existing drybulk carrier fleet based on current newbuilding orders. Charter hire rates have decreased sharply from their historical highs and the value of secondhand vessels has also decreased sharply from their historically high levels. The Baltic Dry Index, or BDI, a daily average of charter rates in 26 shipping routes measured on a time charter and voyage basis and covering Supramax, Panamax, and Capesize drybulk carriers, has fallen over 83% from May 2008 through February 10, 2009.
 
●  
Our operations are subject to international laws and regulations.  Our business and the operation of our vessels are materially affected by applicable government regulation in the form of international conventions and national, state and local laws and regulations.  Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with them or with additional regulations that may be applicable to our operations that are adopted in the future.
 
●  
Servicing our current and future debt limits funds available for other purposes, including the payment of dividends.  As of February 2, 2009, we had total outstanding borrowings under our three loan facilities in the aggregate amount of $295.0 million.  To finance our future fleet expansion, we expect to incur additional secured debt.  We must dedicate a portion of our cash flow from operations to pay the principal and interest on our debt.  These payments limit funds otherwise available for working capital and capital expenditures and may limit funds available for other purposes, including distributing cash to our shareholders, and our inability to service debt could lead to acceleration of our debt payments and foreclosure on our fleet.  On December 5, 2008, we paid a cash and stock dividend on our common stock totaling $0.36 per common share in respect of the third quarter of 2008. The declaration and payment of any dividend is subject to the discretion of our board of directors. Under the terms of the proposed amendments to our three credit facilities, payment of dividends and repurchases of our shares and warrants have been suspended.  Please see the section of this prospectus entitled "Recent Developments--Preliminary Waiver Agreements With Lenders."

        Prospective investors in our securities should also carefully consider the factors set forth in the section of this prospectus entitled “Risk Factors” beginning on page 6.
 
Drybulk Shipping Industry Trends
 
The maritime shipping industry is fundamental to international trade with ocean-going vessels representing the most efficient and often the only method of transporting large volumes of many essential commodities, finished goods and crude and refined petroleum products between the continents and across the seas.  It is a global industry whose performance is closely tied to the level of economic activity in the world.
 
The drybulk shipping industry involves the carriage of bulk commodities.  According to Drewry Shipping Consultants, Ltd., or Drewry, charter hire rates have fallen sharply from the highs recorded in 2008.  The Baltic Dry Index, or BDI, a daily average of charter rates in 26 shipping routes measured on a time charter and voyage basis and covering Supramax, Panamax, and Capesize drybulk carriers, declined from a high of 11,793 in May 2008 to 920 on January 14, 2009 after reaching a low of 663 in December 2008, which represents a decline of 92%.  The BDI fell over 70% in October alone.
 
We currently employ the Star Sigma in the spot market on a voyage charter which will expire at the end of February 2009.  The Star Sigma is scheduled to commence a three year time charter at a gross daily average charter rate of $63,000 beginning in March 2009.  Vessels trading in the spot market are exposed to increased risk of declining charter rates and freight rate volatility compared to vessels employed on time charters.  Since mid-August 2008, the spot day rates in the drybulk charter market have declined very significantly, and drybulk vessel values have also declined both as a result of a slowdown in the availability of global credit and the significant deterioration in charter rates.  Charter rates and vessel values have been affected in part by the lack of availability of credit to finance both vessel purchases and purchases of commodities carried by sea, resulting in a decline in cargo shipments, and the excess supply of iron ore in China which resulted in falling iron ore prices and increased stockpiles in Chinese ports.
 
 
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Capesize rates, which averaged $100,000/day in August 2008, fell to an average of approximately $10,334 per day during the fourth quarter of 2008.  We believe that the root cause of the fall has been a sharp slowdown in Chinese steel demand and prices leading to reduced demand for iron ore. Iron ore price negotiations between Companhia Vale do Rio Doce and Chinese steel mills in the third and fourth quarter of 2008 resulted in a number of Chinese mills turning to domestic mining companies for iron ore.  Additionally, the unwillingness of banks to issue letters of credit resulted in reduced financing for the purchase of commodities carried by sea which has led to a significant decline in cargo shipments.
 
Corporate Structure
 
Star Bulk is a holding company that owns its vessels through separate wholly-owned subsidiaries.  Star Bulk’s wholly-owned subsidiary, Star Bulk Management Inc.,  or Star Bulk Management, performs operational and technical management services for all of our vessels, including chartering, marketing, making capital expenditures, managing personnel, accounting, paying vessel taxes and maintaining insurance.
 
Star Maritime Acquisition Corp., or Star Maritime, was organized under the laws of the State of Delaware on May 13, 2005 as a blank check company formed to acquire, through a merger, capital stock exchange, asset acquisition or similar business combination, one or more assets or target businesses in the shipping industry.  Following the formation of Star Maritime, our officers and directors were the holders of 9,026,924 shares of common stock representing all of our then issued and outstanding capital stock.  On December 21, 2005, Star Maritime consummated its initial public offering of 18,867,500 units, at a price of $10.00 per unit, each unit consisting of one share of Star Maritime common stock and one warrant to purchase one share of Star Maritime common stock at an exercise price of $8.00 per share.  In addition, Star Maritime completed during December 2005 a private placement of an aggregate of 1,132,500 units, or the Private Placement, each unit consisting of one share of common stock and one warrant, to Messrs. Tsirigakis and Syllantavos, our Chief Executive Officer and Chief Financial Officer, respectively, and Messrs. Pappas and Erhardt, our Chairman of the Board and one of our directors.  The gross proceeds of the Private Placement of $11.3 million were used to pay all fees and expenses of the initial public offering and as a result, the entire gross proceeds of the initial public offering amounting to $188.7 million were deposited in a trust account maintained by American Stock Transfer & Trust Company, or the Trust Account.  Star Maritime’s common stock and warrants started trading on the American Stock Exchange under the symbols, SEA and SEA.WS, respectively on December 21, 2005.
 
On January 12, 2007, Star Maritime and Star Bulk entered into definitive agreements to acquire a fleet of eight drybulk carriers with a combined cargo-carrying capacity of approximately 692,000 dwt. from certain subsidiaries of TMT Co. Ltd., or TMT, a shipping company headquartered in Taiwan.  These eight drybulk carriers are referred to as the initial fleet, or initial vessels.  The aggregate purchase price specified in the Master Agreement by and among the Company, Star Maritime and TMT, or the Master Agreement for the initial fleet was $224.5 million in cash and 12,537,645 shares of common stock of Star Bulk.  As additional consideration for eight vessels, we agreed to issue 1,606,962 shares of common stock of Star Bulk to TMT in two installments as follows: (i) 803,481 additional shares of Star Bulk’s common stock, no more than 10 business days following Star Bulk’s filing of its Annual Report on Form 20-F for the fiscal year ended December 31, 2007, and (ii) 803,481 additional shares of Star Bulk’s common stock, no more than 10 business days following Star Bulk’s filing of its Annual Report on Form 20-F for the fiscal year ended December 31, 2008.  The shares in respect of the first installment were issued to a nominee of TMT on July 17, 2008.
 
On November 2, 2007, the U.S. Securities and Exchange Commission, SEC or Commission, declared effective our joint proxy/registration statement filed on Forms F-1/F-4 and on November 27, 2007 we obtained shareholder approval for the acquisition of the initial fleet and for effecting the Redomiciliation Merger as a result of which Star Maritime merged into Star Bulk with Star Maritime merging out of existence and Star Bulk being the surviving entity.  Each share of Star Maritime common stock was exchanged for one share of Star Bulk common stock and each warrant of Star Maritime was assumed by Star Bulk with the same terms and conditions except that each became exercisable for common stock of Star Bulk.  The Redomiciliation Merger became effective after stock markets closed on Friday, November 30, 2007 and the common shares and warrants of Star Maritime ceased trading on the American Stock Exchange under the symbols SEA and SEAU, respectively.  Star Bulk shares and warrants started trading on the Nasdaq Global Market on Monday, December 3, 2007 under the ticker symbols SBLK and SBLKW, respectively.  Immediately following the effective date of the Redomiciliation Merger, TMT and its affiliates owned 30.2% of Star Bulk’s outstanding common stock.
 
 
4

 
We began our operations on December 3, 2007 with the delivery of our first vessel the Star Epsilon.  Three of the eight vessels comprising our initial fleet were delivered to us by the end of December 2007.  Additionally, on December 3, 2007, we entered into an agreement to acquire an additional Supramax vessel, the Star Kappa from TMT, which was not included in the initial fleet and was delivered to us on December 14, 2007.  In 2008, we took delivery of the remaining five vessels that we purchased from TMT, plus an additional four vessels.  In April 2008, we sold the Star Iota  bringing our fleet to a total of twelve vessels.
 
We maintain our principal executive offices at 7, Fragoklisias Street, 2nd floor, Maroussi 151 25, Athens, Greece.  Our telephone number at that address is 30-210-617-8400.
 
The Securities We May Offer
 
We may use this prospectus to offer up to $250.0 million of:
 
●  
common shares,
 
●  
preferred shares,
 
●  
debt securities, including guaranteed debt securities,
 
●  
warrants,
 
●  
purchase contracts, or
 
●  
units.
 
We may also offer securities of the types listed above that are convertible or exchangeable into one or more of the securities listed above.
 
Our debt securities may be guaranteed pursuant to guarantees by our subsidiaries.
 
In addition, the selling shareholders named in this prospectus or in a prospectus supplement to the registration statement of which this prospectus is a part may sell in one or more offerings pursuant to this registration statement up to 14,305,599 of our common shares and up to 1,132,500 of our warrants that were previously acquired in private transactions.  We will not receive any proceeds from the sale of either our common shares or our warrants sold by the selling shareholders.
 
A prospectus supplement will describe the specific types, amounts, prices, and detailed terms of any of these offered securities and may describe certain risks in addition to those set forth below associated with an investment in the securities. Terms used in the prospectus supplement will have the meanings described in this prospectus, unless otherwise specified.
 

 
5

 

RISK FACTORS
 
An investment in our securities involves a high degree of risk.  You should carefully consider the following risks, the risks and the discussion of risks under the heading “Risk Factors” in our annual report on Form 20-F for the year ended December 31, 2007, and the documents we have incorporated by reference in this prospectus that summarize the risks that may materially affect our business before making an investment in our securities.  Please see “Where You Can Find Additional Information – Information Incorporated by Reference.” In addition, you should also consider carefully the risks set forth under the heading “Risk Factors” in any prospectus supplement before investing in any securities offered by this prospectus. The occurrence of one or more of those risk factors could adversely impact our results of operations or financial condition.
 
Industry Specific Risk Factors
 
Charterhire rates for drybulk carriers are volatile and may decrease in the future, which would adversely affect our earnings and ability to pay dividends
 
The drybulk shipping industry is cyclical with attendant volatility in charterhire rates and profitability.  The degree of charterhire rate volatility among different types of drybulk carriers varies widely.  According to Drewry, charterhire rates for Capesize, Panamax and Supramax drybulk carriers have decreased sharply from their historically high levels. The Baltic Dry Index, or BDI, a daily average of charter rates in 26 shipping routes measured on a time charter and voyage basis and covering Supramax, Panamax, and Capesize drybulk carriers, fell over 83% from May 2008 through February 10, 2009, including a decline of over 70% in October 2008 alone.  The decline in charter rates is due to various factors, including the economic recession in the U.S. and other parts of the world, the lack of trade financing for purchases of commodities carried by sea, which has resulted in a significant decline in cargo shipments, and the excess supply of iron ore in China which has resulted in falling iron ore prices and increased stockpiles in Chinese ports. If the drybulk shipping market remains depressed in the future our earnings and available cash flow may decrease.  Our ability to re-charter our vessels on the expiration or termination of their current time charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, economic conditions in the drybulk shipping market.  Fluctuations in charter rates and vessel values result from changes in the supply and demand for drybulk cargoes carried internationally at sea, including coal, iron, ore, grains and minerals.
 
The factors affecting the supply and demand for vessel capacity are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.
 
The factors that influence demand for vessel capacity include:
 
●  
demand for and production of drybulk products;
 
●  
global and regional economic and political conditions;
 
●  
the distance drybulk cargo is to be moved by sea; and
 
●  
changes in seaborne and other transportation patterns.
 
The factors that influence the supply of vessel capacity include:
 
●  
the number of new building deliveries;
 
●  
port and canal congestion;
 
●  
the scrapping of older vessels;
 
●  
vessel casualties; and
 
●  
the number of vessels that are out of service.
 
We anticipate that the future demand for our drybulk carriers will be dependent upon continued economic growth in the world’s economies, including China and India, seasonal and regional changes in demand, changes in the capacity of the global drybulk carrier fleet and the sources and supply of drybulk cargo to be transported by sea.  The capacity of the global drybulk carrier fleet seems likely to increase and economic growth may not continue.  Adverse economic, political, social or other developments could also have a material adverse effect on our business and operating results.
 
 
6

 
Sharp declines in the spot drybulk charter market may affect our earnings and cash flows from the vessels we operate in the spot market
 
        We currently employ the Star Sigma in the spot market on a voyage charter that will expire at the end of Februaty 2009. The Star Sigma is scheduled to commence a three year time charter at a gross daily average charter rate of $63,000 beginning in March 2009.   Vessels trading in the spot market are exposed to increased risk of declining charter rates and freight rate volatility compared to vessels employed on time charters.  Since mid-August 2008, the spot day rates in the drybulk charter market have declined very significantly, and drybulk vessel values have also declined both as a result of a slowdown in the availability of global credit and the significant deterioration in charter rates.  Charter rates and vessel values have been affected in part by the lack of availability of credit to finance both vessel purchases and purchases of commodities carried by sea, resulting in a decline in cargo shipments, and the excess supply of iron ore in China which resulted in falling iron ore prices and increased stockpiles in Chinese ports.  There can be no assurance as to how long charter rates and vessel values will remain at their currently low levels or whether they will improve to any significant degree.  Charter rates may remain at depressed levels for some time which will adversely affect our revenue and profitability.
 
The market values of our vessels have declined and may further decrease, which could limit the amount of funds that we can borrow or trigger certain financial covenants under our current or future credit facilities and/or we may incur a loss if we sell vessels following a decline in their market value
 
The fair market values of our vessels have generally experienced high volatility and have recently declined significantly.  According to Drewry, the market prices for secondhand Capesize, Panamax and Supramax drybulk carriers have recently decreased sharply from their historically high levels.
 
The fair market value of our vessels may continue to fluctuate (i.e., increase and decrease) depending on a number of factors including:
 
●  
prevailing level of charter rates;
 
●  
general economic and market conditions affecting the shipping industry;
 
●  
types and sizes of vessels;
 
●  
supply and demand for vessels;
 
●  
other modes of transportation;
 
●  
cost of newbuildings;
 
●  
governmental or other regulations; and
 
●  
technological advances.
 
In addition, as vessels grow older, they generally decline in value.  If the fair market value of our vessels declines, we may not be in compliance with certain provisions of our term loans and we may not be able to refinance our debt or obtain additional financing.  In addition, if we sell one or more of our vessels at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our consolidated financial statements, the sale may be less than the vessel’s carrying value on our consolidated financial statements, resulting in a loss and a reduction in earnings.  Furthermore, if vessel values fall significantly we may have to record an impairment adjustment in our financial statements which could adversely affect our financial results.
 
World events could affect our results of operations and financial condition
 
Terrorist attacks in New York on September 11, 2001, in London on July 7, 2005 and in Mumbai on November 26, 2008 and the continuing response of the United States and others to these attacks, as well as the threat of future terrorist attacks in the United States or elsewhere, continues to cause uncertainty in the world’s financial markets and may affect our business, operating results and financial condition.  The continuing presence of U.S. and other armed forces in Iraq and Afghanistan may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets.  These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all.  In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region.  Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia.  Any of these occurrences could have a material adverse impact on our operating results, revenues and costs.
 
 
7

 
Terrorist attacks on vessels, such as the October 2002 attack on the M.V. Limburg, a very large crude carrier not related to us, may in the future also negatively affect our operations and financial condition and directly impact our vessels or our customers.  Future terrorist attacks could result in increased volatility and turmoil of the financial markets in the United States and globally.  Any of these occurrences could have a material adverse impact on our revenues and costs.
 
Acts of piracy on ocean-going vessels have recently increased in frequency, which could adversely affect our business
 
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Gulf of Aden and off the Nigerian coast.  Throughout 2008, the frequency of incidents of piracy has increased significantly, particularly in the Gulf of Aden, with drybulk vessels and tankers particularly vulnerable to such attacks.  For example, in November 2008, the Sirius Star, a tanker vessel not affiliated with us, was captured by pirates in the Indian Ocean while carrying crude oil estimated to be worth $100.0 million.  If these piracy attacks result in regions in which our vessels are deployed being characterized as “war risk” zones by insurers, as the Gulf of Aden temporarily was in May 2008, premiums payable by charterers for such coverage could increase significantly.  We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us.  In addition, any act of piracy against our vessels or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition, results of operations and ability to pay dividends.
 
Disruptions in world financial markets and the resulting governmental action in the United States and in other parts of the world could have a material adverse impact on our results of operations, financial condition and cash flows, and could cause the market price of our common stock to further decline
 
The United States and other parts of the world are exhibiting deteriorating economic trends and have been in a recession.  For example, the credit markets in the United States have experienced significant contraction, deleveraging and reduced liquidity, and the United States federal government and state governments have implemented and are considering a broad variety of governmental action and/or new regulation of the financial markets.  Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements.  The Commission, other regulators, self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies, and may effect changes in law or interpretations of existing laws.
 
Recently, a number of financial institutions have experienced serious financial difficulties and, in some cases, have entered bankruptcy proceedings or are in regulatory enforcement actions.  The uncertainty surrounding the future of the credit markets in the United States and the rest of the world has resulted in reduced access to credit worldwide.  As of February 2, 2009, we have total outstanding indebtedness of $295.0 million under our existing credit facilities. 
 
We face risks attendant to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world, among other factors.  Major market disruptions and the current adverse changes in market conditions and regulatory climate in the United States and worldwide may adversely affect our business or impair our ability to borrow amounts under our credit facilities or any future financial arrangements.  We cannot predict how long the current market conditions will last.  However, these recent and developing economic and governmental factors, together with the concurrent decline in charter rates and vessel values, may have a material adverse effect on our results of operations, financial condition or cash flows, have caused the trading price of our common shares on the Nasdaq Global Market to decline precipitously and could cause the price of our common shares to continue to decline or impair our ability to make distributions to our shareholders.
 
A further economic slowdown in the Asia Pacific region could exacerbate the effect of recent slowdowns in the economies of the United States and the European Union and may have a material adverse effect on our business, financial condition and results of operations
 
We anticipate a significant number of the port calls made by our vessels will continue to involve the loading or discharging of dry bulk commodities in ports in the Asia Pacific region.  As a result, negative changes in economic conditions in any Asia Pacific country, particularly in China, may exacerbate the effect of recent slowdowns in the economies of the United States and the European Union and may have a material adverse effect on our business, financial position and results of operations, as well as our future prospects.  In recent years, China has been one of the world’s fastest growing economies in terms of gross domestic product, which has had a significant impact on shipping demand.  Through the end of the third quarter of 2008, China’s gross domestic product was approximately 2.3% lower than it was during the same period in 2007, and it is likely that China and other countries in the Asia Pacific region will continue to experience slowed or even negative economic growth in the near future.  Moreover, the current economic slowdown in the economies of the United States, the European Union and other Asian countries may further adversely affect economic growth in China and elsewhere.  China has recently announced a $586.0 billion stimulus package aimed in part at increasing investment and consumer spending and maintaining export growth in response to the recent slowdown in its economic growth.  Our business, financial condition, results of operations, ability to pay dividends as well as our future prospects, will likely be materially and adversely affected by a further economic downturn in any of these countries.
 
8

 
Changes in the economic and political environment in China and policies adopted by the government to regulate its economy may have a material adverse effect on our business, financial condition and results of operations
 
The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in such respects as structure, government involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation and balance of payments position.  Prior to 1978, the Chinese economy was a planned economy.  Since 1978, increasing emphasis has been placed on the utilization of market forces in the development of the Chinese economy.  Annual and five year State Plans are adopted by the Chinese government in connection with the development of the economy.  Although state-owned enterprises still account for a substantial portion of the Chinese industrial output, in general, the Chinese government is reducing the level of direct control that it exercises over the economy through State Plans and other measures.  There is an increasing level of freedom and autonomy in areas such as allocation of resources, production, pricing and management and a gradual shift in emphasis to a “market economy” and enterprise reform.  Limited price reforms were undertaken, with the result that prices for certain commodities are principally determined by market forces.  Many of the reforms are unprecedented or experimental and may be subject to revision, change or abolition based upon the outcome of such experiments.  If the Chinese government does not continue to pursue a policy of economic reform the level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions, all of which could, adversely affect our business, operating results and financial condition.
 
Charter rates are subject to seasonal fluctuations and market volatility, which may adversely affect our financial condition and ability to pay dividends
 
We own and operate a fleet of 12 vessels consisting of four Capesize and eight Supramax drybulk carriers with an average age of 9.8 years and a combined cargo carrying capacity of approximately 1.1 million dwt.  We employ all of our vessels on medium-to long-term time charters other than the Star Sigma, which is currently employed in the spot market and the Star Alpha, which is committed to the first of four scheduled shipments under a COA expected to commence in the first quarter of 2009. We expect the Star Sigma to trade in the spot market until it commences a three year time charter at a gross daily average charter rate of $63,000 beginning in March 2009. We may in the future employ additional vessels in our fleet in the spot market.  Demand for vessel capacity has historically exhibited seasonal variations and, as a result, fluctuations in charter rates.  This seasonality may result in quarter-to-quarter volatility in our operating results for vessels trading in the spot market.  The drybulk sector is typically stronger in the fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere.  As a result, our revenues from our drybulk carriers may be weaker during the fiscal quarters ended June 30 and September 30, and, conversely, our revenues from our drybulk carriers may be stronger in fiscal quarters ended December 31 and March 31.  Seasonality in the sector in which we operate could materially affect our operating results and cash available for dividends in the future.
 
Rising fuel prices may adversely affect our profits
 
Fuel is a significant, if not the largest, expense in our shipping operations when vessels are not under period charter.  Changes in the price of fuel may adversely affect our profitability.  The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns.  Further, fuel may become much more expensive in the future, which may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.
 
We are subject to international safety regulations and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports
 
Our business and the operation of our vessels are materially affected by government regulation in the form of international conventions, national, state and local laws and regulations in force in the jurisdictions in which the vessels operate, as well as in the country or countries of their registration.  Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such conventions, laws and regulations or the impact thereof on the resale prices or useful lives of our vessels.  Additional conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations.  We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates, and financial assurances with respect to our operations.
 
The operation of our vessels is affected by the requirements set forth in the United Nations’ International Maritime Organization’s International Management Code for the Safe Operation of Ships and Pollution Prevention, or ISM Code.  The ISM Code requires shipowners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies.  The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject it to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.  If we are subject to increased liability for noncompliance or if our insurance coverage is adversely impacted as a result of noncompliance, we may have less cash available for distribution to our stockholders as dividends.  If any of our vessels are denied access to, or are detained in, certain ports, this may decrease our revenues.
 
9

 
Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business
 
International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination.  Inspection procedures may result in the seizure of contents of our vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against us.
 
It is possible that changes to inspection procedures could impose additional financial and legal obligations on us.  Changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical.  Any such changes or developments may have a material adverse effect on our business, financial condition and results of operations.
 
Maritime claimants could arrest one or more of our vessels, which could interrupt our cash flow
 
Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages.  In many jurisdictions, a claimant may seek to obtain security for its claim by arresting a vessel through foreclosure proceedings.  The arrest or attachment of one or more of our vessels could interrupt our cash flow and require us to pay large sums of money to have the arrest or attachment lifted.  In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel which is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner.  Claimants could attempt to assert “sister ship” liability against one vessel in our fleet for claims relating to another of our vessels.
 
Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings
 
A government could requisition one or more of our vessels for title or for hire.  Requisition for title occurs when a government takes control of a vessel and becomes her owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes her charterer at dictated charter rates.  Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances.  Although we would be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of payment would be uncertain.  Government requisition of one or more of our vessels may negatively impact our revenues and reduce the amount of cash we have available for distribution as dividends to our stockholders.
 
Company Specific Risk Factors
 
Star Bulk has a limited operating history and may not operate profitably in the future
 
Star Bulk was formed December 13, 2006 and in January 2007 entered into agreements to acquire eight drybulk carriers.  Star Bulk took delivery of its first vessel in December 2007.  Accordingly, the consolidated financial statements do not provide a meaningful basis for you to evaluate its operations and ability to be profitable in the future.  Star Bulk may not be profitable in the future.
 
We may be unable to comply with the covenants contained in our loan agreements, which would affect our ability to conduct our business if we are unable to obtain waivers or covenant modifications from our lenders.
 
Our loan agreements for our borrowings, which are secured by liens on our vessels, contain various financial covenants. Among those covenants are requirements that relate to our financial position, operating performance and liquidity. For example, under certain provisions of our loan agreements we are required to maintain a ratio of the fair market value of our vessels to the aggregate amounts outstanding of 125% for the first three years and 135% thereafter.
 
The market value of drybulk vessels is sensitive, among other things, to changes in the drybulk charter market, with vessel values deteriorating in times when drybulk charter rates are falling and improving when charter rates are anticipated to rise. The current decline in charter rates in the drybulk market coupled with the prevailing difficulty in obtaining financing for vessel purchases have adversely affected drybulk vessel values, including the vessels in our fleet.  As a result, we may not meet certain collateral maintenance covenants in our loan agreements.
 
We have reached agreements in principle with our lenders to obtain waivers for certain covenants including minimum asset coverage covenants contained in our loan agreements. The related terms are described below.
 
With respect to the $120.0 million facility, the lender will waive the loan-to-value ratio covenant through January 31, 2010.  We will provide a first preferred mortgage on the currently debt-free vessel Star Alpha and pledge an account containing $6.0 million as further security for this facility.
 
With respect to the $150.0 million facility, the lenders will waive the security cover requirement through February 28, 2010, and the minimum asset coverage ratio for the year 2010 will be reduced to 110% from 125%. We will provide first preferred mortgages on the currently debt-free vessels Star Kappa and Star Ypsilon and will pledge an account containing $9.0 million as further security for this facility.
 
With respect to the $35.0 million facility, the lender will waive the security cover requirement through February 28, 2010, and the minimum asset coverage ratio for the year 2010 will be reduced to 110% from 125%.  We will pledge an account containing $5.0 million to as further security for this facility.
 
Under the terms of the above referenced agreements, our dividends and our share repurchases are being suspended, and the interest spread for each of the above loans will be adjusted to 2% per annum for the duration of the respective waiver period.
 
The above agreements require final approval by the credit committees of the respective lenders.

10

 
 
If we are unable to obtain waivers of covenant compliance or modifications to our covenants, or refinance our indebtedness, we may have to sell vessels in our fleet and/or seek to raise additional capital in the equity markets. Furthermore, if the value of our vessels deteriorates significantly, we may have to record an impairment adjustment in our financial statements, which would adversely affect our financial results and further hinder our ability to raise capital.
 
If we are not in compliance with our covenants and are not able to obtain covenant waivers or modifications, our lenders could require us to post additional collateral, enhance our equity and liquidity, increase our interest payments or pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet, or they could accelerate our indebtedness, which would impair our ability to continue to conduct our business. If our indebtedness is accelerated, we might not be able to refinance our debt or obtain additional financing and could lose our vessels if our lenders foreclose their liens. In addition, if we find it necessary to sell our vessels at a time when vessel prices are low, we will recognize losses and a reduction in our earnings, which could affect our ability to raise additional capital necessary for us to comply with our loan agreements.
 
We are dependent on medium- to long-term time charters in a volatile shipping industry and a decline in charterhire rates would affect our results of operations and ability to pay dividends
 
We charter all of our vessels on medium- to long-term time charters with remaining terms of approximately one to five years other than the Star Sigma, which is currently employed in the spot market and the Star Alpha, which is committed to the first of four scheduled shipments under a COA expected to commence in the first quarter of 2009.  We expect the Star Sigma to trade in the spot market until it commences a three year time charter at a gross daily average charter rate of $63,000 beginning in March 2009. The time charter market is highly competitive and spot market charterhire rates (which affect time charter rates) may fluctuate significantly based upon available charters and the supply of, and demand for, seaborne shipping capacity.  Our ability to re-charter our vessels on the expiration or termination of their current time charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, economic conditions in the drybulk shipping market.  The drybulk carrier charter market is volatile, and in the past, time charter and spot market charter rates for drybulk carriers have declined below operating costs of vessels.  If future charterhire rates are depressed, we may not be able to operate our vessels profitably or to pay you dividends.  Under the terms of the proposed amendments to our three credit facilities, payment of dividends and repurchases of our shares and warrants have been suspended.  Please see the section of this prospectus entitled "Recent Developments--Preliminary Waiver Agreements With Lenders."
 
Default by our charterers may lead to decreased revenues and a reduction in earnings
 
Consistent with drybulk shipping industry practice, we have not independently analyzed the creditworthiness of the charterers. Our revenues may be dependent on the performance of our charterers and, as a result, defaults by our charterers may materially adversely affect our revenues. 
 
We depend upon a few significant customers for a large part of our revenues and the loss of one or more of these customers could adversely affect our financial performance
 
We derive a significant part of our charterhire (net of commissions) from a small number of customers, with 68% of our revenues for the nine-month period ended September 30, 2008 generated from six charterers.  Currently, nine of our vessels are employed under fixed rate period charters to six customers and by the end of March 2009, 11 of our vessels will be employed under fixed rate period charters to eight customers.  If one or more of these customers is unable to perform under one or more charters with us and we are not able to find a replacement charter, or if a customer exercises certain rights to terminate the charter, we could suffer a loss of revenues that could materially adversely affect our business, financial condition, results of operations and cash available for distribution as dividends to our shareholders. 
 
We could lose a customer or the benefits of a time charter if, among other things:
 
●  
the customer fails to make charter payments because of its financial inability, disagreements with us or otherwise;
 
●  
the customer terminates the charter because we fail to deliver the vessel within a fixed period of time, the vessel is lost or damaged beyond repair, there are serious deficiencies in the vessel or prolonged periods of off-hire, default under the charter; or
 
●  
the customer terminates the charter because the vessel has been subject to seizure for more than a specified number of days.
 
If we lose a key customer, we may be unable to obtain charters on comparable terms or may become subject to the volatile spot market, which is highly competitive and subject to significant price fluctuations.  The time charters on which we deploy all of our vessels provide for charter rates that are significantly above current market rates, particularly spot market rates that most directly reflect the current depressed levels of the drybulk charter market.  If it were necessary to secure substitute employment, in the spot market or on time charters, for any of these vessels due to the loss of a customer in these market conditions, such employment would be at a significantly lower charter rate than currently generated by such vessel, or we may be unable to secure a charter at all, in either case, resulting in a significant reduction in revenues.  The loss of any of our customers, time charters or vessels, or a decline in payments under our charters, could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends.
 
 
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We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business
 
We enter into, among other things, charter parties with our customers. Such agreements subject us to counterparty risks. The ability of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore industries, the overall financial condition of the counterparty, charter rates received for specific types of vessels, and various expenses.  Consistent with drybulk shipping industry practice, we have not independently analyzed the creditworthiness of the charterers. In addition, in depressed market conditions, our charterers may no longer need a vessel that is currently under charter or may be able to obtain a comparable vessel at lower rates.  As a result, charterers may seek to renegotiate the terms of their existing charter parties or avoid their obligations under those contracts.  Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
Investment in derivative instruments such as freight forward agreements could result in losses
 
From time to time, we may take positions in derivative instruments including freight forward agreements, or FFAs.  Generally, FFAs and other derivative instruments may be used to hedge a vessel owner’s exposure to the charter market for a specified route and period of time. Upon settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and time period, the seller of the FFA is required to pay the buyer an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. If we take positions in FFAs or other derivative instruments we could suffer losses in the settling or termination of the FFA. This could adversely affect our results of operation and cash flow.
 
In December 2008 and January 2009, we entered into a limited number of FFAs on the Capesize index. The Capesize index refers to the daily hire rate of a modern Capesize dry bulk carrier. The FFAs are intended to serve as an approximate hedge for our Capesize vessels trading in the spot market for 2009 and 2010, effectively locking-in the approximate amount of revenue that we expect to receive from such vessels for the relevant periods. We do not expect any of our FFAs to qualify as cash flow hedges for accounting purposes and expect that such FFAs will be recorded on our balance sheet at fair value.  All of our FFAs are cleared transactions and are intended as approximate hedges to our physical exposure in the spot market. 
 
Our earnings may be adversely affected if we are not able to take advantage of favorable charter rates
 
We charter all of our drybulk carriers to customers on medium- to long-term time charters, which generally last from one to five years other than the Star Sigma, which is currently employed in the spot market and the Star Alpha, which is committed to the first of four scheduled shipments under a COA expected to commence in the first quarter of 2009. We expect the Star Sigma to trade in the spot market until it commences a three year time charter at a gross daily average charter rate of $63,000 beginning in March 2009. We may in the future extend the charter periods for the vessels in our fleet.  Our vessels that are committed to longer-term charters may not be available for employment on short-term charters during periods of increasing short-term charterhire rates when these charters may be more profitable than long-term charters.
 
If we fail to manage our planned growth properly, we may not be able to successfully expand our fleet which would adversely affect our overall financial position
 
We intend to continue to expand our fleet.  Our growth will depend on:
 
●  
locating and acquiring suitable vessels;
 
●  
identifying and consummating acquisitions or joint ventures;
 
●  
obtaining required financing;
 
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integrating any acquired vessels successfully with our existing operations;
 
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enhancing our customer base; and
 
●  
managing our expansion.
 
Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty experienced in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures.  We may not be successful in executing our growth plans and may incur significant expenses and losses.
 
 
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Our loan agreements may contain restrictive covenants that may limit our liquidity and corporate activities
 
Our current term loan agreements with Commerzbank AG and Piraeus Bank A.E., and any future loan agreements may impose operating and financial restrictions on us.  These restrictions may limit our ability to:
 
●  
incur additional indebtedness;
 
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create liens on our assets;
 
●  
sell capital stock of our subsidiaries;
 
●  
make investments;
 
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engage in mergers or acquisitions;
 
●  
pay dividends;
 
●  
make capital expenditures;
 
●  
change the management of our vessels or terminate or materially amend the management agreement relating to each vessel; and
 
●  
sell our vessels.
 
Therefore, we may need to seek permission from our lenders in order to engage in some important corporate actions.  The lenders’ interests may be different from ours, and we cannot guarantee that we will be able to obtain the lenders’ permission when needed.  This may prevent us from taking actions that are in our best interest.
 
Servicing debt will limit funds available for other purposes, including capital expenditures and payment of dividends
 
         On December 27, 2007, we entered into a term loan agreement with Commerzbank AG in the amount of $120.0 million to partially finance the Star Gamma, the Star Delta, the Star Epsilon, the Star Zeta, and the Star Theta, which also provide the security for this loan agreement.  This loan bears interest at LIBOR plus a margin and is repayable in twenty-eight consecutive quarterly installments commencing twenty-seven months after our initial borrowings, which was on January 2, 2008.  As of February 2, 2009, we had outstanding borrowings in the amount of $120.0 million under this facility. On April 14, 2008, we entered into a loan agreement, which was subsequently amended on April 17, 2008 and September 18, 2008, for up to $150.0 million with Piraeus Bank A.E. in order to partially finance the acquisition cost of vessels the Star Omicron, the Star Sigma and the Star Ypsilon and also to provide us with additional liquidity.  The loan is secured by a first priority mortgage on the Star Omicron, the Star Beta, and the Star Sigma.  The loan bears interest at LIBOR plus a margin and is repayable in twenty-four quarterly installments through September 2014.  As of February 2, 2009, we had outstanding borrowings in the amount of $143.0 million under this loan.  On July 1, 2008, the Company entered into a loan agreement of up to $35.0 million with Piraeus Bank A.E. to partially finance the acquisition of the Star Cosmo which also provides the security for this loan agreement.   The loan bears interest at LIBOR plus a margin and is repayable in twenty-four quarterly installments through July 2014.  As of February 2, 2009, we had outstanding borrowings in the amount of $32.0 million under this loan facility.        
 
As of February 2, 2009, we had total outstanding borrowings under our three loan facilities in the aggregate amount of $295.0 million.
 
We may be required to dedicate a portion of our cash flow from operations to pay the principal and interest on our debt.  These payments limit funds otherwise available for working capital expenditures and other purposes, including payment of dividends.  Under the terms of the proposed amendments to our three credit facilities, payment of dividends and repurchases of our shares and warrants have been suspended.  Please see the section of this prospectus entitled "Recent Developments--Preliminary Waiver Agreements With Lenders."  If we are unable to service our debt, it may have a material adverse effect on our financial condition and results of operations.
 
 
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In the highly competitive international drybulk shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources which may adversely affect our results of operations
 
We employ our vessels in a highly competitive market that is capital intensive and highly fragmented.  Competition arises primarily from other vessel owners, some of whom have substantially greater resources than us.  Competition for the transportation of drybulk cargoes can be intense and depends on price, location, size, age, condition and the acceptability of the vessel and its managers to the charterers.  Due in part to the highly fragmented market, competitors with greater resources could operate larger fleets through consolidations or acquisitions and may be able to offer more favorable terms.
 
We may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively affect the effectiveness of our management and our results of operations
 
Our success depends to a significant extent upon the abilities and efforts of our management team.  As of February 2, 2009, we had 22 employees.  Twenty of our employees, through Star Bulk Management, are engaged in the day to day management of the vessels in our fleet.  Our success depends upon our ability to retain key members of our management team and the ability of Star Bulk Management to recruit and hire suitable employees.  The loss of any members of our senior management team could adversely affect our business prospects and financial condition.  Difficulty in hiring and retaining personnel could adversely affect our results of operations.  We do not maintain “key-man” life insurance on any of our officers or employees of Star Bulk Management.
 
As we expand our fleet, we will need to expand our operations and financial systems and hire new shoreside staff and seafarers to staff our vessels; if we cannot expand these systems or recruit suitable employees, our performance may be adversely affected
 
Our operating and financial systems may not be adequate as we expand our fleet, and our attempts to implement those systems may be ineffective.  In addition, we rely on our wholly-owned subsidiary, Star Bulk Management, to recruit shoreside administrative and management personnel.  Shoreside personnel are recruited by Star Bulk Management through referrals from other shipping companies and traditional methods of securing personnel, such as placing classified advertisements in shipping industry periodicals.  Star Bulk Management has sub-contracted crew management, which includes the recruitment of seafarers, to Bernhardt, a major international third-party technical management company, and Union.  Star Bulk Management and its crewing agent may not be able to continue to hire suitable employees as Star Bulk expands its fleet.  If we are unable to operate our financial and operations systems effectively, recruit suitable employees or if Star Bulk Management’s unaffiliated crewing agent encounters business or financial difficulties, our performance may be materially adversely affected.
 
Risks involved with operating ocean going vessels could affect our business and reputation, which would adversely affect our revenues
 
The operation of an ocean-going vessel carries inherent risks.  These risks include the possibility of:
 
●  
crew strikes and/or boycotts;
 
●  
marine disaster;
 
●  
piracy;
 
●  
environmental accidents;
 
●  
cargo and property losses or damage; and
 
●  
business interruptions caused by mechanical failure, human error, war, terrorism, piracy, political action in various countries or adverse weather conditions.
 
Any of these circumstances or events could increase our costs or lower our revenues.
 
Our vessels may suffer damage and may face unexpected drydocking costs, which could adversely affect our cash flow and financial condition
 
If our vessels suffer damage, they may need to be repaired at a drydocking facility.  The costs of drydock repairs are unpredictable and can be substantial.  We may have to pay drydocking costs that our insurance does not cover.  The loss of earnings while these vessels are being repaired and reconditioned, as well as the actual cost of these repairs, would decrease our earnings.
 
 
14

 
Purchasing and operating secondhand vessels may result in increased operating costs and vessel off-hire, which could adversely affect our earnings
 
Our inspection of secondhand vessels prior to purchase does not provide us with the same knowledge about their condition and cost of any required or anticipated repairs that we would have had if these vessels had been built for and operated exclusively by us.  We will not receive the benefit of warranties on secondhand vessels.
 
Typically, the costs to maintain a vessel in good operating condition increase with the age of the vessel.  Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels.  Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.
 
Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to our vessels and may restrict the type of activities in which the vessels may engage.  As our vessels age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.
 
We inspected the thirteen vessels that we acquired from both related and unrelated third parties, considered the age and condition of the vessels in budgeting for their operating, insurance and maintenance costs, and if we acquire additional secondhand vessels in the future, we may encounter higher operating and maintenance costs due to the age and condition of those additional vessels.
 
We may not have adequate insurance to compensate us for the loss of a vessel, which may have a material adverse effect on our financial condition and results of operation
 
We have procured hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance coverage and war risk insurance for our fleet.  We do not maintain, for our vessels, insurance against loss of hire, which covers business interruptions that result from the loss of use of a vessel.  We may not be adequately insured against all risks.  We may not be able to obtain adequate insurance coverage for our fleet in the future.  The insurers may not pay particular claims.  Our insurance policies may contain deductibles for which we will be responsible and limitations and exclusions which may increase our costs or lower our revenue.  Moreover, insurers may default on claims they are required to pay.  If our insurance is not enough to cover claims that may arise, the deficiency may have a material adverse effect on our financial condition and results of operations.
 
We may not be able to pay dividends
 
We previously paid regular dividends on a quarterly basis from our operating surplus, in amounts that allowed us to retain a portion of our cash flows to fund vessel or fleet acquisitions, and for debt repayment and other corporate purposes, as determined by our management and board of directors. Under the terms of the proposed amendments to our three credit facilities, payment of dividends and repurchases of our shares and warrants have been suspended.  Please see the section of this prospectus entitled "Recent Developments--Preliminary Waiver Agreements With Lenders."
 
As a result of deteriorating market conditions in the international shipping industry and in particular the sharp decline in charter rates and vessel values in the drybulk sector and restrictions imposed by our lenders, including the restriction on dividend payments under the terms of the proposed amendments to our credit facilities, we may not reinstate the payment of dividends until the end of the waiver period in early 2010 or the restriction on our payment of dividends is removed from our amended credit facility agreements.  If reinstated, any dividend payments may be at reduced levels.
 
The declaration and payment of dividends will be subject at all times to the discretion of our board of directors.  The timing and amount of dividends will depend on our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors.  Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividends, or if there is no surplus, dividends may be declared or paid out of net profits for the fiscal year in which the dividend is declared and for the preceding fiscal year.
 
We are a holding company, and depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations or to make dividend payments
 
We are a holding company and our wholly-owned subsidiaries, conduct all of our operations and own all of our operating assets.  We will have no significant assets other than the equity interests in our wholly-owned subsidiaries.  As a result, our ability to make dividend payments depends on our subsidiaries and their ability to distribute funds to us.  If we are unable to obtain funds from our subsidiaries, our board of directors may exercise its discretion not to pay dividends.  We and our subsidiaries will be permitted to pay dividends under our credit facilities only for so long as we are in compliance with all applicable financial covenants, terms and conditions.
 
 
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We depend on officers who may engage in other business activities in the international shipping industry which may create conflicts of interest
 
Prokopios Tsirigakis, our Chief Executive Officer and a member of our board of directors, and George Syllantavos, our Chief Financial Officer, Secretary and member of our board of directors participate in business activities not associated with the Company.  As a result, Mr. Tsirigakis and Mr. Syllantavos may devote less time to the Company than if they were not engaged in other business activities and may owe fiduciary duties to the shareholders of both the Company as well as shareholders of other companies with which they may be affiliated, which may create conflicts of interest in matters involving or affecting the Company and its customers.  It is not certain that any of these conflicts of interest will be resolved in our favor.
 
In accordance with Star Bulk’s Code of Ethics, all ongoing and future transactions between Star Bulk and any of its officers and directors or their respective affiliates, will be on terms believed by Star Bulk to be no less favorable than are available from unaffiliated third parties, and such transactions will require prior approval, in each instance by a majority of Star Bulk’s uninterested “independent” directors or the members of Star Bulk’s board who do not have an interest in the transaction, in either case who had access, at Star Bulk’s expense, to its attorneys or independent legal counsel.
 
We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law, which may negatively affect the ability of public shareholders to protect their interests
 
We are incorporated under the laws of the Republic of the Marshall Islands, and our corporate affairs are governed by our Articles of Incorporation and bylaws and by the Marshall Islands Business Corporations Act, or BCA.  The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States.  However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA.  The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions.  Shareholder rights may differ as well.  While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, public shareholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.
 
All of our assets are located outside of the United States.  Our business is operated primarily from our offices in Athens, Greece.  In addition, our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States.  As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise.  Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict you from enforcing a judgment against our assets or the assets of our directors and officers.  Although you may bring an original action against us, our officers and directors in the courts of the Marshall Islands based on U.S. laws, and the courts of the Marshall Islands may impose civil liability, including monetary damages, against us, our officers or directors for a cause of action arising under Marshall Islands law, it may be impracticable for you to do so given the geographic location of the Marshall Islands.
 
There is a risk that we could be treated as a U.S. domestic corporation for U.S. federal income tax purposes after the merger of Star Maritime with and into Star Bulk, with Star Bulk as the surviving corporation, or Redomiciliation Merger, which would adversely affect our earnings
 
Section 7874(b) of the U.S. Internal Revenue Code of 1986, or the Code, provides that, unless certain requirements are satisfied, a corporation organized outside the United States which acquires substantially all of the assets (through a plan or a series of related transactions) of a corporation organized in the United States will be treated as a U.S. domestic corporation for U.S. federal income tax purposes if shareholders of the U.S. corporation whose assets are being acquired own at least 80% of the non-U.S. acquiring corporation after the acquisition.  If Section 7874(b) of the Code were to apply to Star Maritime and the Redomiciliation Merger, then, among other consequences, the Company, as the surviving entity of the Redomiciliation Merger, would be subject to U.S. federal income tax as a U.S. domestic corporation on its worldwide income after the Redomiciliation Merger.  Upon completion of the Redomiciliation Merger and the concurrent issuance of stock to TMT under the acquisition agreements, the stockholders of Star Maritime owned less than 80% of the Company.  Therefore, the Company believes that it should not be subject to Section 7874(b) of the Code after the Redomiciliation Merger.  Star Maritime obtained an opinion of its counsel, Seward & Kissel LLP, that Section 7874(b) should not apply to the Redomiciliation Merger.  However, there is no authority directly addressing the application of Section 7874(b) to a transaction such as the Redomiciliation Merger where shares in a foreign corporation such as the Company are issued concurrently with (or shortly after) a merger.  In particular, since there is no authority directly applying the “series of related transactions” or “plan” provisions to the post-acquisition stock ownership requirements of Section 7874(b), the United States Internal Revenue Service, or IRS, may not agree with Seward & Kissel’s opinion on this matter.  Moreover, Star Maritime has not sought a ruling from the IRS on this point.  Therefore, IRS may seek to assert that we are subject to U.S. federal income tax on our worldwide income for taxable years after the Redomiciliation Merger, although Seward & Kissel is of the opinion that such an assertion should not be successful.
 
 
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We may have to pay tax on United States source income, which would reduce our earnings
 
Under the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as the Company and its subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source shipping income and such income is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury regulations promulgated thereunder.
 
We expect that we will qualify for this statutory tax exemption and we have taken this position for U.S. federal income tax return reporting purposes for  2007 and we intend to take this position for 2008.  However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption and thereby become subject to U.S. federal income tax on our U.S. source income.
 
If we are not entitled to this exemption under Section 883 for any taxable year, we would be subject for those years to a 4% U.S. federal income tax on its U.S.-source shipping income.  The imposition of this taxation could have a negative effect on our business and would result in decreased earnings.
 
The preferential tax rates applicable to qualified dividend income are temporary, and the enactment of proposed legislation could affect whether dividends paid by us constitute qualified dividend income eligible for the preferential rate
 
Certain of our distributions may be treated as qualified dividend income eligible for preferential rates of U.S. federal income tax to U.S. shareholders.  In the absence of legislation extending the term for these preferential tax rates, all dividends received by such U.S. taxpayers in tax years beginning on January 1, 2011 or later will be taxed at graduated tax rates applicable to ordinary income.
 
In addition, legislation has been proposed in the U.S. Congress that would, if enacted, deny the preferential rate of U.S. federal income tax currently imposed on qualified dividend income with respect to dividends received from a non-U.S. corporation if the non-U.S. corporation is created or organized under the laws of a jurisdiction that does not have a comprehensive income tax system.  Because the Marshall Islands imposes only limited taxes on entities organized under its laws, it is likely that if this legislation were enacted, the preferential tax rates of federal income tax may no longer be applicable to distributions received from us.  As of the date hereof, it is not possible to predict with certainty whether this proposed legislation will be enacted.
 
U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. holders
 
We will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of its assets produce or are held for the production of those types of “passive income.”  For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business.  For purposes of these tests, income derived from the performance of services does not constitute “passive income.” U.S. shareholders of a PFIC may be subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
 
Based on our method of operation, we take the position for United States federal income tax purposes we are not a PFIC with respect to any taxable year.  In this regard, we intend to treat the gross income we will derive or will be deemed to derive from our time chartering activities as services income, rather than rental income.  Accordingly, we take the position that our income from our time chartering activities does not constitute “passive income,” and the assets that we will own and operate in connection with the production of that income do not constitute passive assets.
 
 
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There is, however, no direct legal authority under the PFIC rules addressing our method of operation.  In addition, we have not received an opinion of counsel with respect to this issue.  Accordingly, the U.S. Internal Revenue Service, or the IRS, or a court of law may not accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC.  Moreover, may constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of its operations.  For example, if we were treated as earning rental income from our chartering activities rather than services income, we would be treated as a PFIC.
 
If the IRS were to find that we are or have been a PFIC for any taxable year, its U.S. shareholders will face adverse U.S. tax consequences.  Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse consequences for such shareholders), such shareholders would be liable to pay U.S. federal income tax at the then highest income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of our common shares.
 
Our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act of 2002, Section 404.  Since we failed to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, we may be unable to accurately report our consolidated financial results or prevent fraud and could be required to restate our historical financial statements, any of which could have a material adverse effect on our business and the price of our common stock
 
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2007.  Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2007, the Company’s disclosure controls and procedures were not effective because of the material weaknesses in internal control over financial reporting described below.  Management has assessed the effectiveness of the Company’s internal control over financial reporting at December 31, 2007, based on the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on the aforementioned assessment, the management concluded that internal control over financial reporting was not effective due to material weaknesses identified in the Company’s internal control over financial reporting.
 
Star Bulk took delivery of its first vessel in December 2007 and as a result, management began the process to replace the internal controls over financial reporting which previously existed while the Company was a blank check company with those of a company that owns and operates vessels.  Although progress was made,  the Company did not have sufficient time to complete designing and implementing a comprehensive system of internal controls over financial reporting that would prevent or timely detect material adjustments and identify financial statement disclosure requirements.  Consequently, adjustments and disclosures that were material in the aggregate to the consolidated financial statements and necessary to present the consolidated financial statements for the year ended December 31, 2007 in accordance with U.S. GAAP were made by the Company after being identified by the Company’s independent registered public accounting firm.  Specifically, we did not have in place adequate internal controls over our financial close and reporting processes and we lacked sufficient accounting personnel with the necessary level of US GAAP expertise which resulted in the Company not being able to:
 
●  
Properly evaluate and account for non-routine or complex transactions, including the determination of the purchase price of the vessels, fair value of time charter agreements acquired, the application of SFAS 123(R), the classification of expenses related to the target acquisition process, and the completeness of the accrual of general and administrative expenses; and
 
●  
Properly identify all financial statement disclosure requirements in accordance with U.S. GAAP including disclosure surrounding related party transactions.
 
We have determined that these adjustments were not prevented or detected due to material weaknesses in our controls due to the absence of sufficient time for management to (1) design and implement a comprehensive system of internal controls and (2) hire sufficient accounting personnel with the requisite US GAAP expertise that are required to support our operation as a shipping company.  However, management has made the necessary adjustments to present the annual consolidated financial statements for the year ended December 31, 2007 in accordance with U.S. GAAP.
 
We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis, including consideration of the material weaknesses identified above, or other deficiencies we may identify.  The Company has already and will further implement actions as necessary in its continuing assessment of disclosure controls and internal controls over financial reporting. 
 
 
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        We may be unable to successfully complete the procedures and attestation requirements of Section 404 or our auditors may identify significant deficiencies, as well as material weaknesses, in internal control over financial reporting in future reporting periods.  If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting.  Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the Commission or violations of Nasdaq Global Market listing rules.  There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our consolidated financial statements.  Confidence in the reliability of our financial statements could also suffer if our independent registered public accounting firm were to report material weaknesses in our internal controls over financial reporting.  This could materially adversely affect us and lead to a decline in the price of our common stock.  We believe that the out-of-pocket costs, the diversion of management’s attention from running our day-to-day operations and operational changes caused by the need to comply with the requirements of Section 404 will be significant.  If the time and costs associated with such compliance exceed our current expectations, our profitability could be affected.
 
If the recent volatility in LIBOR continues, it could affect our profitability, earnings and cash flow
 
        LIBOR has recently been volatile, with the spread between LIBOR and the prime lending rate widening significantly at times.  These conditions are the result of the recent disruptions in the international credit markets.  Because the interest rates borne by our outstanding indebtedness fluctuate with changes in LIBOR, if this volatility were to continue, it would affect the amount of interest payable on our debt, which in turn, could have an adverse effect on our profitability, earnings and cash flow.
 
Risks Relating to Our Common Stock
 
There may be no continuing public market for you to resell our common stock
 
    Our common shares commenced trading on the Nasdaq Global Market in December 2007.  We cannot assure you that an active and liquid public market for our common shares will continue.  The price of our common stock may be volatile and may fluctuate due to factors such as:
 
●  
actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry;
 
●  
mergers and strategic alliances in the drybulk shipping industry;
 
●  
market conditions in the drybulk shipping industry and the general state of the securities markets;
 
●  
changes in government regulation;
 
●  
shortfalls in our operating results from levels forecast by securities analysts; and
 
●  
announcements concerning us or our competitors.
 
You may not be able to sell your shares of our common stock in the future at the price that you paid for them or at all.  In addition, if the price of our common stock falls below $1.00, we may be involuntarily delisted from the Nasdaq Global Market.
 
 
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Certain stockholders hold registration rights, which may have an adverse effect on the market price of our common stock
 
Initial Stockholders of Star Maritime who purchased common stock and units in private transactions prior to Star Maritime’s initial public offering have certain registration rights which would require us, under certain circumstances, to register the resale of their shares and warrants at any time following the release of the shares and warrants from escrow which occurred on December 15, 2008.  Pursuant to those registration rights, we have included in the registration statement of which this prospectus is a part 10,159,424 shares of common stock, which includes 1,132,500 common shares which may be issued upon the exercise of the warrants, and 1,132,500 warrants, all of which will be eligible for trading in the public market.  The registration of these common shares and warrants in addition to the registration of the additional securities included on the registration statement of which this prospectus is a part, may have an adverse effect on the market price of our common stock and warrants.
 
Future sales of our common stock or warrants could cause the market price of our common stock or warrants to decline
 
Sales of a substantial number of shares of our common stock or warrants in the public market, or the perception that these sales could occur, may depress the market price for our common stock.  These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future.
 
We may issue additional shares of our common stock, warrants or other equity securities or securities convertible into our equity securities in the future and our stockholders may elect to sell large numbers of shares held by them from time to time.  Our amended and restated articles of incorporation authorize us to issue 100,000,000 common shares with par value $0.01 per share of which 42,516,433 shares and warrants to purchase 19,048,136 common shares were outstanding as of December 31, 2007 and 60,301,279 shares and warrants to purchase 5,916,150 common shares were outstanding as of February 2, 2009.
 
Anti-takeover provisions in our organizational documents could make it difficult for our stockholders to replace or remove our current board of directors or have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common stock
 
Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our stockholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management.  In addition, the same provisions may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable.
 
These provisions include:
 
●  
authorizing our board of directors to issue “blank check” preferred stock without stockholder approval;
 
●  
providing for a classified board of directors with staggered, three year terms;
 
●  
prohibiting cumulative voting in the election of directors; and
 
●  
authorizing the board to call a special meeting at any time.
 
The market price of our common shares and warrants has fluctuated widely and may fluctuate widely in the future
 
The market price of our common shares and warrants has fluctuated widely since our common shares and warrants began trading in the Nasdaq Global Market in December 2007, and may continue to do so as a result of many factors such as actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry, mergers and strategic alliances in the shipping industry, market conditions in the shipping industry, changes in government regulation, shortfalls in our operating results from levels forecast by securities analysts, announcements concerning us or our competitors and the general state of the securities market.
 
The market price of our common shares has recently dropped below $5.00 per share, and the last reported sale price on The Nasdaq Global Market on February 10, 2009 was $2.77 per share.  If the market price of our common shares remains below $5.00 per share, under stock exchange rules, our shareholders will not be able to use such shares as collateral for borrowing in margin accounts.  This inability to continue to use our common shares as collateral may lead to sales of such shares creating downward pressure on and increased volatility in the market price of our common shares.
 
The shipping industry has been highly unpredictable and volatile. The market for common shares in this industry may be equally volatile.  Therefore, we cannot assure you that you will be able to sell any of our common shares you may have purchased at a price greater than or equal to its original purchase price.
 
 
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RECENT DEVELOPMENTS
 
On July 1, 2008, we entered into a term loan agreement with Piraeus Bank A.E. in the amount of $35.0 million to partially finance the acquisition of the Star Cosmo.  Upon signing the term loan facility agreement we committed to pay a non-refundable arrangement fee of 0.4% of the facility amount.
 
As of July 17, 2008, 803,481 shares of common stock of Star Bulk were issued to TMT pursuant to the Master Agreement.
 
In August 2008, TMT Co. Ltd., an indirect shareholder of Star Bulk through its nominee (F5 Capital), alleged that it had suffered unspecified damages arising from an alleged breach by Star Bulk of a purported obligation under the Master Agreement to maintain a registration statement in effect so as to permit TMT to sell its 12,537,645 Star Bulk shares freely on the open market.  Among other things, TMT had demanded that Star Bulk repurchase approximately 3.8 million shares from TMT at a share price of $14.04 per share, which was the closing price of Star Bulk’s common shares on the Nasdaq Global Market on June 2, 2008, which demand was withdrawn by TMT in connection with discussions between Star Bulk and TMT.  Star Bulk denies that it has any such obligation under the Master Agreement and is currently discussing the matter with TMT.  On November 3, 2008, the Commission declared effective a registration statement on Form F-3 relating to the resale of shares held by F5 Capital, the nominee of TMT Co. Ltd. (“TMT”). As of the date hereof, no claim has been filed by TMT or any affiliate thereof against Star Bulk.
 
On September 18, 2008, we entered into an agreement to amend our Piraeus Bank loan agreement dated April 14, 2008.  We drew down $69.0 million to partially finance the acquisition of the Star Ypsilon.  This loan bears interest at LIBOR plus a margin, is repayable in twenty-four quarterly installments through September 2014 and is secured by a first priority mortgage on the Star Omicron, the Star Beta and the Star Sigma.
 
On October 6, 2008, we delivered to its purchasers the Star Iota, which we had entered into an agreement to sell for gross proceeds of $18.4 million on April 24, 2008.
 
On October 20, 2008, Mr. Nobu Su resigned from our board of directors.
 
On October 30, 2008, we entered into a time charter with Companhia Vale do Rio Doce (Vale) for the Star Beta for a minimum of two months and maximum of four months at the gross daily rate of $15,500 for the first fifty days and $25,000 for the balance of the time charter plus a repositioning fee of $525,000.  Upon the conclusion of this time charter in January 2009, the Star Beta was employed in the spot market.
 
        The Star Sigma, which was on time charter to a Japanese charterer at a gross daily charter rate of $100,000 per day until March 1, 2009 (earliest redelivery), was redelivered to us earlier pursuant to an agreement whereby the charterer agreed to pay the contracted rate less $8,000 per day, which is the approximate operating cost for the vessel, from the date of the actual redelivery in November 2008 through March 1, 2009. We received payment in full and the vessel is currently trading in the spot market on a voyage charter at a gross rate of approximately $14,100 per day, resulting in revenue for the vessel that is effectively higher than it would have been under the original charter at the rate of $100,000 per day. The vessel is scheduled to commence a three year time charter at a gross daily average charter rate of $63,000 beginning in March 2009.
 
On November 17, 2008, we declared a cash and stock dividend on our common stock totaling $0.36 per common share for the quarter ended September 30, 2008.  This dividend was paid on December 5, 2008 to stockholders of record on November 28, 2008.  The dividend payment consisted of a cash portion in the amount of $0.18 per share with the remaining half of the dividend paid in the form of newly issued common shares.  The stock portion of this dividend was 0.078179 for every share held as of the record date. The amount of newly issued shares was based on the volume weighted average price of Star Bulk’s shares on the Nasdaq Global Market during the five trading days before the ex-dividend date or November 25, 2008.  In addition, as of January 20, 2009 management and the directors reinvested the cash portion of their dividend for the quarter ended September 30, 2008 into 818,877 newly issued shares in a private placement at the same weighted average price as the stock portion of such dividend, effectively electing to receive the full amount of the dividend in the form of newly issued shares, which shares have been included in the registration statement of which this prospectus is a part.
 
In December 2008 and January 2009, we entered into a limited number of FFAs on the Capesize index. The Capesize index refers to the daily hire rate of a modern Capesize dry bulk carrier. The FFAs are intended to serve as an approximate hedge for our Capesize vessels trading in the spot market for 2009 and 2010, effectively locking-in the approximate amount of revenue that we expect to receive from such vessels for the relevant periods. We do not expect any of our FFAs to qualify as cash flow hedges for accounting purposes and expect that such FFAs will be recorded on our balance sheet at fair value.  All of our FFAs are cleared transactions and are intended as approximate hedges to our physical exposure in the spot market.  Generally, FFAs and other derivative instruments may be used to hedge a vessel owner’s exposure to the charter market for a specified route and period of time. Upon settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and time period, the seller of the FFA is required to pay the buyer an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum.
 
 
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On January 27, 2009, the Star Gamma commenced a three year time charter at a gross daily average rate of $38,000.
 
On January 28 2009, the Star Epsilon commenced a five year time charter at a gross daily rate of $32,400.
 
On February 2, 2009, we entered into a one year time charter agreement for the Star Delta at a gross daily rate of $11,250. The vessel is expected to be delivered to the new charterer by mid-February 2009.
 
On February 10, 2009, we entered into a 13 to 15 month time charter agreement for the Star Beta at a gross daily rate of $32,500.  The vessel is expected to be delivered to the new charterer in February 2009.
 
Arbitration proceedings have commenced pursuant to disputes that have arisen with the charterers of the Star Alpha.  The disputes relate to vessel performance characteristics and hire. Arbitrators have been appointed by two parties and claim submissions are expected to be filed by parties with the arbitration panel by February 28, 2009.  We expect that the arbitration proceeding may be joined by additional parties that sub-charter the vessel.  The vessel recently underwent unscheduled repairs which resulted in a 25 day off-hire period.  Following the completion of the repairs, the Star Alpha was redelivered to us by its charterers approximately one month prior to the earliest redelivery date allowed under the time charter agreement. We have notified the charterers of the vessel that we intend to seek additional damages in connection with the early redelivery of the Star Alpha in the current arbitration proceedings.
 
On January 20, 2009, we entered into a COA with Companhia Vale do Rio Doce.  Under the terms of the COA, we are obligated to transport approximately 700,000 metric tons of iron ore between Brazil and China in four separate Capesize vessel shipments with the first shipment scheduled in the first quarter of 2009.  On February 5, 2009, we committed the Star Alpha to the first shipment under the COA.  Under a COA, we transport multiple shipments of drybulk cargo during the term of the contract on specified routes, either at a fixed or variable price.  Unlike time charters, COAs do not require us to dedicate any particular vessel to fulfill our contractual obligations to transport cargo; however, we intend to dedicate the Star Alpha to fulfill our obligations under this agreement.  COAs are typically priced on a per metric ton of cargo basis as opposed to a daily time charter basis.
 
Preliminary Waiver Agreements With Lenders
 
Our loan agreements for our borrowings, which are secured by liens on our vessels, contain various financial covenants. Among those covenants are requirements that relate to our financial position, operating performance and liquidity. For example, under certain provisions of our loan agreements we are required to maintain a ratio of the fair market value of our vessels to the aggregate amounts outstanding of 125% for the first three years and 135% thereafter.
 
The market value of drybulk vessels is sensitive, among other things, to changes in the drybulk charter market, with vessel values deteriorating in times when drybulk charter rates are falling and improving when charter rates are anticipated to rise. The current decline in charter rates in the drybulk market coupled with the prevailing difficulty in obtaining financing for vessel purchases have adversely affected drybulk vessel values, including the vessels in our fleet.  As a result, we may not meet certain collateral maintenance covenants in our loan agreements.
 
We have reached agreements in principle with our lenders to obtain waivers for certain covenants including minimum asset coverage covenants contained in our loan agreements. The related terms are described below.
 
With respect to the $120.0 million facility, the lender will waive the loan-to-value ratio covenant through January 31, 2010.  We will provide a first preferred mortgage on the currently debt-free vessel Star Alpha and pledge an account containing $6.0 million as further security for this facility.
 
With respect to the $150.0 million facility, the lenders will waive the security cover requirement through February 28, 2010, and the minimum asset coverage ratio for the year 2010 will be reduced to 110% from 125%. We will provide first preferred mortgages on the currently debt-free vessels Star Kappa and Star Ypsilon and will pledge an account containing $9.0 million as further security for this facility.
 
With respect to the $35.0 million facility, the lender will waive the security cover requirement through February 28, 2010, and the minimum asset coverage ratio for the year 2010 will be reduced to 110% from 125%.  We will pledge an account containing $5.0 million to as further security for this facility.
 
Under the terms of the above referenced agreements, our dividends and our share repurchases are being suspended, and the interest spread for each of the above loans will be adjusted to 2% per annum for the duration of the respective waiver period.
 
The above agreements require final approval by the credit committees of the respective lenders.

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Equity Incentive Plan
 
On December 5, 2008, pursuant to the terms of our Equity Incentive Plan we authorized the issuance of an aggregate of 130,000 unvested restricted common shares to all of our employees and an aggregate of 940,000 unvested restricted common shares to the members of our board of directors.  All of these shares vested on January 31, 2009.
 
Share and Warrant Repurchase Program
 
As of February 2, 2009, we have repurchased under the share and warrant repurchase program announced on January 24, 2008, a total of 1,247,000 of our common shares at an aggregate purchase price of approximately $8.0 million (average of $6.40 per common share) and a total of 1,362,500 of our warrants at an aggregate purchase price of approximately $5.5 million (average of $4.02 per warrant).  During the three months ended September 30, 2008, we repurchased a total of 700,000 of our common shares at an aggregate purchase price of approximately $5.7 million (average of $8.07 per share).  During the fourth quarter ended December 31, 2008, we repurchased a total of 495,000 of our common shares at an aggregate purchase price of approximately $1.7 million (average of $3.51 per share).
 
As of February 2, 2009, we paid an aggregate of $13,449,469 for the repurchased securities leaving $36,550,531 of repurchasing capacity in our $50,000,000 share and warrant buyback program.

 
23

Warrant Conversions
 
As of February 2, 2009, 12,721,350 warrants had been converted into shares of common stock resulting in proceeds to us of $101,770,800. 
 
As of November 30, 2007, the date of the Redomiciliation Merger, we had 41,564,569 shares of common stock and 20,000,000 warrants outstanding.  As of February 2, 2009, we had 60,301,279 shares of common stock and 5,916,150 warrants outstanding. 
 
Dividend Policy
 
We previously paid regular dividends on a quarterly basis from our operating surplus, in amounts that allowed us to retain a portion of our cash flows to fund vessel or fleet acquisitions, and for debt repayment and other corporate purposes, as determined by our management and board of directors. Under the terms of the proposed amendments to our three credit facilities, payment of dividends and repurchases of our shares and warrants have been suspended. Please see the section of this prospectus entitled "--Preliminary Waiver Agreements With Lenders."
 
As a result of deteriorating market conditions in the international shipping industry and in particular the sharp decline in charter rates and vessel values in the drybulk sector and restrictions imposed by our lenders, including the restriction on dividend payments under the terms of the proposed amendments to our credit facilities, we may not reinstate the payment of dividends until the end of the waiver period in early 2010 or the restriction on our payment of dividends is removed from our amended credit facility agreements. If reinstated, any dividend payments may be at reduced levels.
 
The declaration and payment of dividends will be subject at all times to the discretion of our board of directors. The timing and amount of dividends will depend on our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividends, or if there is no surplus, dividends may be declared or paid out of net profits for the fiscal year in which the dividend is declared and for the preceding fiscal year.
 
Other Developments
 
According to an amended Schedule 13D filed by F5 Capital with the Commission on July 29, 2008, on June 20, 2008, TMT and certain of its affiliates entered into a private agreement (the “Agreement”) with Oceanbulk Shipping and Trading, or OBST, a company founded by our non-executive Chairman and director, Mr. Petros Pappas, to transfer shares of Star Bulk common stock to certain parties nominated by OBST in settlement of certain commercial obligations of TMT (which obligations were and are unrelated to Star Bulk and its business), and pursuant to the Agreement, on July 10, 2008, F5 Capital, TMT’s nominee, transferred an aggregate of 9,537,645 shares of Star Bulk common stock to Glassy Sea Navigation Limited (2,384,411 shares), Legion Finance Inc. (2,384,412 shares), Marquis Shipholding Ltd (2,384,411 shares) and Venere Shipholding S.A (2,384,411 shares). Mr. Nobu Su, the sole director and shareholder of F5 Capital, is a former member of the board of directors of Star Bulk. Star Bulk was not a party to this transaction.
 
We commenced an arbitration proceeding as complainant against Oldendorff Gmbh & Co. KG of Germany (“Oldendorff”), seeking damages resulting from Oldendorff’s repudiation of a charter relating to the Star Beta. The Star Beta had been time chartered by a subsidiary of the Company to Industrial Carriers Inc. of Ukraine (“ICI”). Under that time charter, ICI was obligated to pay a gross daily charter hire rate of $106,500 until February 2010. In January 2008, ICI sub-chartered the vessel to Oldendorff for one year at a gross daily charter hire rate of $130,000 until February 2009. In October 2008, ICI assigned its rights and obligations under the sub-charter to one of our subsidiaries in exchange for ICI being released from the remaining term of the ICI charter. According to press reports, ICI subsequently filed for protection from its creditors in a Greek insolvency proceeding. Oldendorff notified the Company that it considers the assignment of the sub-charter to be an effective repudiation of the sub-charter by ICI.  In January 2009, we made a written submission to our appointed arbitrator asserting claims against Oldendorff and alleged damages in the amount of approximately $14,709,000.  We believe that the assignment was valid and that Oldendorff has erroneously repudiated the sub-charter.  
 
Transactions with Related Parties
 
Interchart Shipping Inc. or Interchart, a company affiliated to Oceanbulk acts as a chartering broker of the Star Zeta, the Star Omicron and the Star Cosmo.  As of December 31, 2007 and September 30, 2008, Star Bulk had an outstanding liability of $0 and $52,000 respectively, to Interchart.  During the nine months ended September 30, 2007 and 2008, the brokerage commission of 1.25% on charter revenue paid to Interchart amounted to $0 and $220,000, respectively.
 
On June 3, 2008, the Company entered into an agreement with a company affiliated with Oceanbulk Maritime, S.A., or the Oceanbulk Affiliate, a company founded by Star Bulk’s Chairman, Mr. Petros Pappas, to acquire the Star Ypsilon, a Capesize drybulk carrier for the aggregate purchase price of $87.2 million, which was the same price that the Oceanbulk Affiliate had paid when it acquired the vessel from an unrelated third party. We entered into a time charter agreement for approximately three years with Vinyl Navigation, a company affiliated with Oceanbulk, to employ the Star Ypsilon at an average daily hire rate of $91,932 following its delivery to us on September 18, 2008. Vinyl Navigation has a back-to-back charter agreement with TMT, a company controlled by a former director of the Company, Mr. Nobu Su, on the same terms as our charter agreement with Vinyl Navigation. No commissions were charged to Star Bulk either on the sale or the chartering of the Star Ypsilon.
 
Recent Developments in Environmental and Other Regulations
 
International Maritime Organization
 
Air Emissions
 
The United Nations' International Maritime Organization, or IMO, has negotiated international conventions that impose liability for oil pollution in international waters and a signatory’s territorial waters. In September 1997, the IMO adopted Annex VI to the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, or MARPOL, to address air pollution from ships. Annex VI was ratified in May 2004 and became effective in May 2005. Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances, such as chlorofluorocarbons. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. We believe that all our vessels are currently compliant in all material respects with Annex VI. Additional or new conventions, laws and regulations may be adopted that could adversely affect our ability to manage our vessels. For example, at its 58th session in October 2008, the Marine Environmental Protection Committee of the IMO voted unanimously to adopt amendments to Annex VI, regarding particulate matter, nitrogen oxide and sulfur oxide emissions standards. The revised Annex VI reduces air pollution from vessels by, among other things (i) implementing a progressive reduction of sulfur oxide emissions from ships, with the global sulfur cap reduced initially to 3.50% (from the current cap of 4.50%), effective from January 1, 2012, then progressively to 0.50%, effective from January 1, 2020, subject to a feasibility review to be completed no later than 2018; and (ii) establishing new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation.  These amendments to Annex VI are expected to enter into force on July 1, 2010, which is six months after the deemed acceptance date of January 1, 2010. Once these amendments become effective, we may incur costs to comply with these revised standards.
 
 
24

 
Oil Pollution Liability
 
Although the U.S. is not a party to these conventions, many countries have ratified and follow the liability plan adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended in 2000, or the CLC. Under this convention and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain complete defenses.  Under an amendment to the Protocol that became effective on November 1, 2003, for vessels of 5,000 to 140,000 gross tons (a unit of measurement for the total enclosed spaces within a vessel), liability will be limited to approximately $6.7 million plus $943 for each additional gross ton over 5,000. For vessels of over 140,000 gross tons, liability will be limited to approximately $134.0 million. As the convention calculates liability in terms of a basket of currencies, these figures are based on currency exchange rates on February 5, 2009. The right to limit liability is forfeited under the CLC where the spill is caused by the owner’s actual fault and under the 1992 Protocol where the spill is caused by the owner’s intentional or reckless conduct. Vessels trading to states that are parties to these conventions must provide evidence of insurance covering the liability of the owner. In jurisdictions where the International Convention on Civil Liability for Oil Pollution Damage has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that convention. We believe that our P&I insurance will cover the liability under the plan adopted by the IMO.
 
In 2001, the IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, which imposes strict liability on ship owners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel.  The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended).  The Bunker Convention has been ratified by a sufficient number of nations for entry into force, and it became effective on November 21, 2008.  
 
In 2005, the European Union adopted a directive on ship-source pollution, imposing criminal sanctions for intentional, reckless or negligent pollution discharges by ships.  The directive could result in criminal liability for pollution from vessels in waters of European countries that adopt implementing legislation.  Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims.
 
U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation, and Liability Act
 
In 1990, the U.S. Congress enacted the Oil Pollution Act, or OPA, to establish an extensive regulatory and liability regime for environmental protection and cleanup of oil spills. OPA affects all owners and operators whose vessels trade with the U.S. or its territories or possessions, or whose vessels operate in the waters of the U.S., which include the U.S. territorial sea and the 200 nautical mile exclusive economic zone around the U.S. The Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, was adopted in 1980 and it imposes liability for cleanup and natural resource damage from the release of hazardous substances (other than oil) whether on land or at sea. Both OPA and CERCLA impact our operations.
 
Under OPA, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include:
 
●  
natural resources damage and the costs of assessment thereof;
 
●  
real and personal property damage;
 
●  
net loss of taxes, royalties, rents, fees and other lost revenues;
 
●  
lost profits or impairment of earning capacity due to property or natural resources damage;
 
●  
net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards; and
 
●  
loss of subsistence use of natural resources.
 
 
25

 
Amendments to OPA that came into effect on July 11, 2006 increased the liability limits for responsible parties for any vessel other than a tank vessel to $950 per gross ton or $800,000, whichever is greater. These limits of liability do not apply if an incident was directly caused by violation of applicable U.S. federal safety, construction or operating regulations or by a responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.
 
In addition, CERCLA applies to the discharge of hazardous substances (other than oil) whether on land or at sea, contains a liability regime similar to OPA and provides for cleanup, removal and natural resource damages. Liability per vessel under CERCLA is limited to the greater of $300 per gross ton or $5 million, unless the incident is caused by gross negligence, willful misconduct, or a violation of certain regulations, in which case liability is unlimited.
 
OPA requires owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet their potential liabilities under OPA. Effective October 17, 2008, the U.S. Coast Guard regulations requiring evidence of financial responsibility were amended to conform the OPA financial responsibility requirements to the July 2006 increases in liability limits.  Current U.S. Coast Guard regulations require evidence of financial responsibility in the amount of $900 per gross ton for non-tank vessels, which includes the OPA limitation on liability of $600 per gross ton and the CERCLA liability limit of $300 per gross ton.  Under the regulations, vessel owners and operators may evidence their financial responsibility by showing proof of insurance, surety bond, self-insurance or guaranty. Under OPA, an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessels in the fleet having the greatest maximum liability under OPA.  We have complied with the U.S. Coast Guard regulations by providing a certificate of responsibility from third party entities that are acceptable to the U.S. Coast Guard evidencing sufficient self-insurance.
 
We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage it could have an adverse effect on our business and results of operation.
 
The U.S. Coast Guard’s regulations concerning certificates of financial responsibility provide, in accordance with OPA, that claimants may bring suit directly against an insurer or guarantor that furnishes certificates of financial responsibility. In the event that such insurer or guarantor is sued directly, it is prohibited from asserting any contractual defense that it may have had against the responsible party and is limited to asserting those defenses available to the responsible party and the defense that the incident was caused by the willful misconduct of the responsible party. Certain organizations, which had typically provided certificates of financial responsibility under pre-OPA laws, including the major protection and indemnity organizations, have declined to furnish evidence of insurance for vessel owners and operators if they are subject to direct actions or are required to waive insurance policy defenses.
 
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining vessels owners’ responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call.
 
 
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The U.S. Clean Water Act
 
The U.S. Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA.
 
The United States Environmental Protection Agency, or EPA, historically exempted the discharge of ballast water and other substances incidental to the normal operation of vessels in U.S. waters from CWA permitting requirements. However, on March 31, 2005, a U.S. District Court ruled that the EPA exceeded its authority in creating an exemption for ballast water. On September 18, 2006, the court issued an order invalidating the exemption in the EPA’s regulations for all discharges incidental to the normal operation of a vessel as of September 30, 2008, and directed the EPA to develop a system for regulating all discharges from vessels by that date. The District Court’s decision was affirmed by the Ninth Circuit Court of Appeals on July 23, 2008. The Ninth Circuit’s ruling meant that owners and operators of vessels traveling in U.S. waters would soon be required to comply with the CWA permitting program to be developed by the EPA or face penalties. Seeking to provide relief to certain types of vessels, the U.S. Congress enacted laws in July 2008 that exempted from the impending CWA vessel permitting program recreational vessels, commercial fishing vessels, and any other commercial vessel less than 79 feet in length.
 
In response to the invalidation and removal of the EPA’s vessel exemption by the Ninth Circuit, the EPA has enacted rules governing the regulation of ballast water discharges and other discharges incidental to the normal operation of vessels within U.S. waters. Under the new rules, which took effect February 6, 2009, commercial vessels 79 feet in length or longer (other than commercial fishing vessels), which we refer to as regulated vessels, are required to obtain a CWA permit regulating and authorizing such normal discharges. This permit, which the EPA has designated as the Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels, or VGP, incorporates the current U.S. Coast Guard requirements for ballast water management as well as supplemental ballast water requirements, and includes limits applicable to 26 specific discharge streams, such as deck runoff, bilge water and gray water.
 
For each discharge type, among other things, the VGP establishes effluent limits pertaining to the constituents found in the effluent, including best management practices, or BMPs, designed to decrease the amount of constituents entering the waste stream. Unlike land-based discharges, which are deemed acceptable by meeting certain EPA-imposed numerical effluent limits, each of the 26 VGP discharge limits is deemed to be met when a regulated vessel carries out the BMPs pertinent to that specific discharge stream. The VGP imposes additional requirements on certain regulated vessel types, including tankers, that emit discharges unique to those vessels. Administrative provisions, such as inspection, monitoring, recordkeeping and reporting requirements are also included for all regulated vessels.
 
On August 31, 2008, the District Court ordered that the date for implementation of the VGP be postponed from September 30, 2008 until December 19, 2008. This date was further postponed until February 6, 2009 by the District Court.   Although the VGP became effective on February 6, 2009, the VGP application procedure, known as the Notice of Intent, or NOI, has yet to be finalized. Accordingly, regulated vessels will effectively be covered under the VGP from February 6, 2009 until June 19, 2009, at which time the “eNOI” electronic filing interface will become operational. Thereafter, owners and operators of regulated vessels must file their NOIs prior to September 19, 2009. Any regulated vessel that does not file an NOI by this deadline will, as of that date, no longer be covered by the VGP and will not be allowed to discharge into U.S. navigable waters until it has obtained a VGP. Any regulated vessel that was delivered on or before the September 19, 2009 deadline will receive final VGP permit coverage on the date that the EPA receives such regulated vessel’s complete NOI. Regulated vessels delivered after the September 19, 2009 deadline will not receive VGP permit coverage until 30 days after their NOI submission. Our fleet is composed entirely of regulated vessels, and we intend to submit NOIs for each vessel in our fleet as soon after June 19, 2009 as practicable.
 
In addition, pursuant to section 401 of the CWA which requires each state to certify federal discharge permits such as the VGP, certain states have enacted additional discharge standards as conditions to their certification of the VGP. These local standards bring the VGP into compliance with more stringent state requirements, such as those further restricting ballast water discharges and preventing the introduction of non-indigenous species considered to be invasive. The VGP and its state-specific regulations and any similar restrictions enacted in the future will increase the costs of operating in the relevant waters.
 
National Invasive Species Act
 
The U.S. National Invasive Species Act, or NISA, was enacted in 1996 in response to growing reports of harmful organisms being released into U.S. ports through ballast water taken on by vessels in foreign ports. The U.S. Coast Guard adopted regulations under NISA in July 2004 that impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering U.S. waters. These requirements can be met by performing mid-ocean ballast exchange, by retaining ballast water on board the vessel, or by using environmentally sound alternative ballast water management methods approved by the U.S. Coast Guard. Mid-ocean ballast exchange is the primary method for compliance with the U.S. Coast Guard regulations, since holding ballast water can prevent vessels from performing cargo operations upon arrival in the U.S., and alternative methods are still under development. Vessels that are unable to conduct mid-ocean ballast exchange due to voyage or safety concerns may discharge minimum amounts of ballast water, provided that they comply with recordkeeping requirements and document the reasons they could not follow the required ballast water management requirements. The U.S. Coast Guard is developing a proposal to establish ballast water discharge standards, which could set maximum acceptable discharge limits for various invasive species, and/or lead to requirements for active treatment of ballast water. The U.S. House of Representatives has recently passed a bill that amends NISA by prohibiting the discharge of ballast water unless it has been treated with specified methods or acceptable alternatives. Similar bills have been introduced in the U.S. Senate, but we cannot predict which bill, if any, will be enacted into law. In the absence of federal standards, states have enacted legislation or regulations to address invasive species through ballast water and hull cleaning management and permitting requirements. For instance, the state of California has recently enacted legislation extending its ballast water management program to regulate the management of “hull fouling” organisms attached to vessels and adopted regulations limiting the number of organisms in ballast water discharges.  A U.S. District Court dismissed challenges to the state of Michigan’s ballast water management legislation mandating the use of various techniques for ballast water treatment, and, on November 21, 2008, this decision was affirmed by the Sixth Circuit Court of Appeals. Other states may proceed with the enactment of similar requirements that could increase the costs of operating in state waters.
 
 
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Other Environmental Initiatives
 
The European Union is considering legislation that will affect the operation of vessels and the liability of owners for oil pollution. It is difficult to predict what legislation, if any, may be promulgated by the European Union or any other country or authority.
 
In addition to the requirements of MARPOL Annex VI (described above), the U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, required the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our vessels that operate in such port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these requirements. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. As indicated above, our vessels operating in covered port areas are already equipped with vapor recovery systems that satisfy these existing requirements. The EPA and some states, however, have proposed more stringent regulations of air emissions from ocean-going vessels. For example, on July 24, 2008, the California Air Resources Board of the State of California, or CARB, approved clean-fuel regulations applicable to all vessels sailing within 24 miles of the California coastline whose itineraries call for them to enter any California ports, terminal facilities, or internal or estuarine waters. The new CARB regulations require such vessels to use low sulfur marine fuels rather than bunker fuel. By July 1, 2009, such vessels are required to switch either to marine gas oil with a sulfur content of no more than 1.5% or marine diesel oil with a sulfur content of no more than 0.5%. By 2012, only marine gas oil and marine diesel oil fuels with 0.1% sulfur will be allowed. In the event our vessels were to travel within such waters, these new regulations would increase our costs.
 
Additionally, EPA has proposed new emissions standards for new Category 3 marine diesel engines.  These are engines with per-cylinder displacement at or above 30 liters and are typically found on large ocean-going vessels such as drybulk vessels.  The EPA proposes to require the application of advanced emission control technologies as well as controls on the sulfur content of fuels.
 
Resource Conservation and Recovery Act
 
Our operations occasionally generate and require the transportation, treatment and disposal of both hazardous and non-hazardous solid wastes that are subject to the requirements of the U.S. Resource Conservation and Recovery Act or comparable state, local or foreign requirements. In addition, from time to time we arrange for the disposal of hazardous waste or hazardous substances at offsite disposal facilities. If such materials are improperly disposed of by third parties, we may still be held liable for clean up costs under applicable laws.
 
Greenhouse Gas Regulation
 
In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which we refer to as the Kyoto Protocol, entered into force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programs to reduce emissions of certain gases, generally referred to as greenhouse gases, which are suspected of contributing to global warming. Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol. However, the European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from vessels. In the U.S., the California Attorney General and a coalition of environmental groups in October 2007 petitioned the EPA to regulate greenhouse gas emissions from ocean-going vessels under the CAA. Any passage of climate control legislation or other regulatory initiatives by the IMO, European Union or individual countries where we operate that restrict emissions of greenhouse gases could entail financial impacts on our operations that we cannot predict with certainty at this time.
 
 
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Vessel Security Regulations
 
Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the Maritime Transportation Security Act of 2002, or the MTSA, came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the U.S. Similarly, in December 2002, amendments to the International Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the convention dealing specifically with maritime security. The new chapter came into effect in July 2004 and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created International Ship and Port Facilities Security Code or ISPS Code. Among the various requirements are:
 
●  
on-board installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications;
 
●  
on-board installation of ship security alert systems;
 
●  
the development of vessel security plans; and
 
●  
compliance with flag state security certification requirements.
 
The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures provided such vessels have on board a valid International Ship Security Certificate that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code as ratified by the ship’s flag state. We have implemented the various security measures addressed by the MTSA, SOLAS and the ISPS Code.
 
Other Environmental Initiatives
 
        We refer you to the section of our Annual Report on Form 20-F for the year ended December 31, 2007 entitled “Environmental and Other Regulations” for a discussion of the government regulations and laws that significantly affect the ownership and operation of our fleet.
 
 
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THE INTERNATIONAL DRY BULK SHIPPING INDUSTRY
 
The information and data in this section relating to the international dry bulk shipping industry has been provided by Drewry Shipping Consultants (Drewry), and is taken from Drewry databases and other sources available in the public domain.  Drewry has advised us that it accurately describes the international dry bulk shipping industry, subject to the availability and reliability of the data supporting the statistical and graphical information presented.  In particular, the data contained in this section is compiled on a periodic basis and may not reflect the most recent events and current trends in the drybulk shipping market.  Drewry’s methodologies for collecting information and data, and therefore the information discussed in this section, may differ from those of other sources, and does not reflect all or even necessarily a comprehensive set of the actual transactions occurring in the dry bulk shipping industry.  The source of all tables and charts is Drewry unless otherwise indicated.
 
Introduction
 
The marine industry is a vital link in international trade, with oceangoing vessels representing the most efficient, and often the only means of transporting large volumes of basic commodities and finished products.  Seaborne cargo is categorized as dry cargo or liquid cargo.  Dry cargo includes dry bulk cargo, container cargo and non container cargo.  Container cargo is shipped in 20 or 40 foot containers and includes a wide variety of finished products.  Non-container cargo includes other dry cargo that cannot be shipped in a container due to size, weight or handling requirements, such as large manufacturing equipment or large industrial vehicles.  Liquid cargo includes crude oil, refined oil products, liquefied gases, chemicals and associated products, all of which are shipped in tankers.
 
In 2007, approximately 5.1 billion tons of dry cargo were transported by sea, of which dry bulk cargo accounted for 2.96 billion tons.  The following table presents the breakdown of the global trade by type of cargo in 2000 and 2007.
 
World Seaborne Trade 2000 and 2007
 
 
          Millions of Tons
    CAGR(1)
           % Total Seaborne Trade
 
2000
2007(p)
2000-2007
2000
2007
Drybulk Cargo
         
Major Bulks
1,249
1,809
5.4%
19.1%
20.2%
Coal
539
769
5.0%
8.2%
8.6%
Iron Ore
489
812
7.5%
7.5%
9.1%
Grain
221
228
0.4%
3.4%
2.6%
Minor Bulks
901
1,155
3.6%
13.8%
12.9%
Total Drybulk
2,150
2,964
4.6%
   
Container Cargo
620
1,272
10.8%
9.5%
14.2%
Non Container/General Cargo
720
820
1.9%
11.0%
9.2%
Total Dry Cargo
3,490
5,056
5.4%
53.4%
56.6%
           
Liquid Cargo
3,051
3,881
3.5%
46.6%
43.4%
           
TOTAL ALL CARGO
6,541
8,937
4.5%
100.0%
100.0%

(p)  Provisional.
 
(1)  Compound annual growth rate.
 
Source: Drewry
 
Dry bulk cargo can be further defined as either major bulk cargo or minor bulk cargo, all of which is shipped in bulk carriers.  Major bulk cargo includes, among other things, iron ore, coal and grain.  Minor bulk cargo includes agricultural products, mineral cargo (including metal concentrates), cement, forest products and metal products.  Dry bulk cargo is normally shipped in large quantities and can be easily stowed in a single hold with little risk of cargo damage.
 
Dry Bulk Shipping
 
Drybulk Carrier Demand
 
The demand for drybulk carriers is determined by the volume and geographical distribution of seaborne dry bulk trade, which in turn is influenced by trends in the global economy.  During the 1980s and 1990s seaborne dry bulk trade increased by slightly more than 2% per annum.  However, between 2000 and 2007, seaborne dry bulk trade increased at a CAGR of 4.7%. Although no final data is available for dry bulk seaborne in 2008 it is clear that the slowdown in the world economy has had an adverse impact on trade and growth rates for 2008 will be below those recorded in the period 2002-2007.
 
 
30

 
The following chart illustrates the changes in seaborne trade between the major and minor bulks in the period 2000 to 2007.
 
Dry Bulk Trade Development
 
(Millions of Tons)
 
P=provisional
Source: Drewry
 
Historically, certain economies have acted as the “primary driver” of dry bulk trade.  In the 1990s Japan was the driving force, when buoyant Japanese industrial production stimulated demand for imported bulk commodities.  More recently China has been the main driver behind the recent increase in seaborne dry bulk trade as high levels of economic growth have generated increased demand for imported raw materials.  However, Chinese demand for imported dry bulk commodities weakened in 2008 in line with the downturn in the global and Chinese economies. The following table illustrates China’s gross domestic product growth rate compared to that of the United States and the world during the periods indicated.
 
Real GDP Growth
 
(% change previous period)

GNP
2000
2001
2002
2003
2004
2005
2006
2007
2008(p)
Global  Economy
4.8
2.4
3.0
4.1
5.3
4.4
5.1
5.0
3.85
USA
3.8
0.3
1.6
2.7
3.9
3.1
2.9
2.0
1.4
Europe
3.4
1.7
1.1
1.1
2.1
1.8
3.0
2.7
1.2
Japan
2.8
0.4
-0.3
1.8
2.7
1.9
2.4
2.1
0.4
China
8.0
7.5
8.3
10.0
10.1
10.4
11.6
11.9
9.5
India
5.1
4.4
4.7
7.4
7.0
9.1
9.8
9.3
7.6

P = provisional
 
Source: Drewry
 
 
 
31

 
In particular Chinese imports or iron ore alone increased from 70.0 million tons in 2000 to 384.0 million tons in 2007, which has generated much additional employment for the larger vessels in the drybulk carrier fleet.  In addition to coal and iron ore, Chinese imports of steel products also increased sharply between 2002 and 2007, thereby creating additional demand for drybulk carriers.  Nevertheless, provisional data for 2008 suggests that the growth in Chinese imports of dry bulk commodities has slowed down considerably.
 
Chinese Iron Ore Imports
 
(Millions of Tons)
 
Year
        Imports
% of Change
2000
70.0
26.6
2001
92.5
32.1
2002
111.3
20.3
2003
148.2
33.2
2004
208.1
40.4
2005
275.2
32.2
2006
326.0
18.5
2007
383.7
17.6

Source: Drewry
 
The extent to which increases in dry bulk trade have affected demand for drybulk carriers is shown in estimates of ton-mile demand.  Ton-mile demand is calculated by multiplying the volume of cargo moved on each route by the distance of the voyage.
 
The following table and chart below detail the changes in trade and ton-mile demand for the primary dry bulk commodities.
 
Drybulk Carrier Seaborne Trade: 2000-2007
 
(Millions of Tons)
 

                 
CAGR
 
2000
2001
2002
2003
2004
2005
2006
2007
2000/2007 %
Coal
539
587
590
619
650
675
709
761
5.0%
Iron Ore
489
503
544
580
644
715
759
812
7.5%
Grain
221
213
210
211
208
212
221
228
0.4%
Minor Bulks
901
890
900
957
1,025
1,049
1,103
1,155
3.6%
Total
2,151
2,193
2,244
2,367
2,526
2,651
2,793
2,956
4.6%
Annual Change %
8.3
2.0
2.3
5.5
6.7
4.9
5.3
5.9
 

(1)  Compound annual growth rate.
 
Source: Drewry
 
Ton Mile Demand: 2000-2007
 
(Billion Ton-Miles)
 

                 
CAGR
 
2000
2001
2002
2003
2004
2005
2006
2007
2000/2007 %
Coal
2,831
3,082
3,098
3,250
3,412
3,544
3,547
3,845
4.5%
Iron Ore
2,690
2,766
2,990
3,192
3,525
3,899
4,097
4,383
7.2%
Grain
1,161
1,118
1,103
1,108
1,089
1,112
1,161
1,196
0.4%
Minor Bulks
4,457
4,404
4,452
4,724
5,059
5,172
5,431
5,697
3.6%
Total
11,139
11,370
11,643
12,274
13,085
13,727
14,236
15,121
4.5%

Source: Drewry
 
 
32

 
Between 2000 and 2007, ton-mile demand in the dry bulk sector increased by a CAGR of 4.5%.  This is however above the long term growth rate in ton mile demand in the dry bulk sector and reflects the rise in long haul movements, especially for commodities such as iron ore.
 
Drybulk carriers are one of the most versatile elements of the global shipping fleet in terms of employment alternatives.  They seldom operate on round trip voyages and the norm is often triangular or multi-leg voyages.  Hence, trade distances assume greater importance in the demand equation and increases in long haul shipments will have greater impact on overall vessel demand.  The following map represents the major global dry bulk trade routes.
 
Major Dry Bulk Seaborne Trade Routes
 
Source: Drewry
 
Demand for drybulk carrier capacity is also affected by the operating efficiency of the global fleet.  In recent years the growth in trade has led to port congestion, with ships at times being forced to wait outside port to either load or discharge due to limited supply of berths at major ports.  This inefficiency has been a further factor contributing to the general tightness in the market.
 
Seasonal variations in the commodity markets, including iron ore, steam coal and grain can also have a further impact on demand for drybulk carriers.  For example, steam coal’s link to the energy and electricity markets results in increased demand when power companies increase their stock in winter months and when refrigeration and air conditioning increase electricity demand in summer months.
 
Drybulk Carrier Supply
 
The world drybulk fleet is generally divided into six major categories, based on a vessel’s cargo carrying capacity.  These categories consist of: Very Large Ore Carrier, Capesize, Post Panamax, Panamax, Handymax and Handysize.
 
Category
Size Range - Dwt
Handysize
10-39,999
Handymax
40-59,999
Panamax
60-79,999
Post Panamax
80-109,999
Capesize
110-199,999
VLOC
200,000 +
 
 
33

 
●  
Handysize.  Handysize vessels have a carrying capacity of up to 39,999 dwt.  These vessels almost exclusively carry minor bulk cargo.  Increasingly, ships of this type operate on regional trading routes, and may serve as trans-shipment feeders for larger vessels.  Handysize vessels are well suited for small ports with length and draft restrictions.  Their cargo gear enables them to service ports lacking the infrastructure for cargo loading and unloading.
 
●  
Handymax.  Handymax vessels have a carrying capacity of between 40,000 and 59,999 dwt.  These vessels operate on a large number of geographically dispersed global trade routes, carrying primarily grains and minor bulks.  Within the Handymax category there is also a sub-sector known as Supramax.  Supramax bulk carriers are ships between 50,000 to 59,999 dwt, normally offering cargo loading and unloading flexibility with on-board cranes, while at the same time possessing the cargo carrying capability approaching conventional Panamax bulk carriers.  Hence, the earnings potential of a Supramax drybulk carrier, when compared to a conventional Handymax vessel of 45,000 dwt, is greater.
 
●  
Panamax.  Panamax vessels have a carrying capacity of between 60,000 and 79,999 dwt.  These vessels carry coal, grains, and, to a lesser extent, minor bulks, including steel products, forest products and fertilizers.  Panamax vessels are able to pass through the Panama Canal, making them more versatile than larger vessels.
 
●  
Post Panamax.  Typically between 80,000 and 109,999 dwt, they tend to be shallower and have a larger beam than a standard Panamax vessel with a higher cubic capacity.  They have been designed specifically for loading high cubic cargoes from draught restricted ports.
 
●  
Capesize.  Capesize vessels have carrying capacities 110,000 and 199,999 dwt.  Only the largest ports around the world possess the infrastructure to accommodate vessels of this size.  Capesize vessels are mainly used to transport iron ore or coal and, to a lesser extent, grains, primarily on long-haul routes.
 
●  
VLOC.  Very large ore carriers are in excess of 200,000 dwt and are a comparatively new sector of the drybulk carrier fleet.  VLOCs are built to exploit economies of scale on long-haul iron ore.  The following table illustrates the size and breakdown of the global dry bulk fleet as of September 2008.
 
Drybulk Carrier Fleet – December 2008
 
Size  Category
Deadweight  Tonnes
Number of  Vessels
% of Total Fleet
Total Capacity
% of Total Fleet
     
(number)
(million dwt)
(dwt)
Handysize
10-39,999
3,010
42.5
80.4
19.2
Handymax
40-59,999
1,694
23.9
82.2
19.6
Panamax
60-79,999
1,364
19.3
97.7
23.3
Post Panamax
80-109,999
204
2.9
17.9
4.3
Capesize
110-199,999
676
9.6
111.3
26.6
Vloc
200,000+
128
1.8
29.3
7.0
Total
 
7,076
100.0
418.8
100.0
Source: Drewry

The supply of drybulk carriers is dependent on the delivery of new vessels from the orderbook and the removal of vessels from the global fleet, either through scrapping or loss.  As of December 2008 the global dry bulk orderbook amounted to 295.0 million dwt, or 70.4% of the existing drybulk carrier fleet.
 
 
34

 
 
Drybulk Carrier Orderbook – December 2008
 
Size  Category
Deadweight  Tonnes
Number of  Vessels
Orderbook as % of Existing Fleet - No
Total Capacity _ Million Dwt
Orderbook as % of Existing  Fleet - Dwt
           
Handysize
10-39,999
868
28.8
27.2
33.8
Handymax
40-59,999
969
57.2
54.4
66.2
Panamax
60-79,999
235
17.2
16.8
17.2
Post Panamax
80-109,999
541
265.2
46.7
260.9
Capesize
110-199,999
652
96.4
109.9
98.7
Vloc
200,000+
146
114.1
40
136.5
Total
 
3,411
48.2
295.0
70.4

Source: Drewry
 

 
The number of ships removed from the fleet in any period is dependent upon prevailing market conditions, scrap prices in relation to current and prospective charter market conditions and the age profile of the existing fleet.  Generally, as a vessel ages, its operational efficiency declines due to rising maintenance requirements to the point where it becomes unprofitable to keep the ship in operation.  The following chart illustrates the age profile of the global drybulk carrier fleet in December 2008.
 
Drybulk Carrier Age Profile – December 2008
 

Source: Drewry

The average age at which a drybulk carrier has been scrapped over the last five years has been 28 years.  However, due to recent strength in the dry bulk shipping industry, over the last two years the average age at which dry bulk carriers have been scrapped has increased and a number of well-maintained vessels have continued to operate past the age of 30.
 
 
35

 
Drybulk Carrier Scrapping
 

   
Handysize
   
Handymax
   
Panamax
   
Capesize
   
Total
   
% of Fleet
Year
   
No.
   
Dwt
     
No.
   
Dwt
   
No.
   
Dwt
     
No.
   
Dwt
     
No.
   
Dwt
   
 Scrapped
 
2000
    50       1,192,000       40       1,454,000       11       667,000       4       452,000       105       3,765,000      
1.4
 
2001
    62       1,408,000       40       1,492,000       28       1,870,000       3       401,000       133       5,171,000      
1.9
 
2002
    64       1,556,000       25       938,000       18       1,200,000       8       997,000       115       4,691,000      
1.6
 
2003
    25       597,000       29       1,103,000       7       465,000       2       248,000       63       2,413,000      
0.8
 
2004
    5       113,000       0       0       1       95,000       1       123,000       7       331,000      
0.1
 
2005
    4       109,000       4       165,000       3       202,000       2       247,000       13       723,000      
0.2
 
2006
    21       474,843       10       380,439       8       538,785       2       296,000       41       1,690,067      
0.5
 
2007
    9       198,792       1       33,527       2       141,346       0       0       12       373,665      
0.1
 

* Total fleet – end period
Source: Drewry
 
 
Charter Hire Rates
 
Drybulk carriers are employed in the market through a number of different chartering options.  The general terms typically found in these types of contracts are described below.
 
●  
A bareboat charter involves the use of a vessel usually over longer periods of time ranging up to several years.  In this case, all voyage related costs, including vessel fuel, or bunker, and port dues as well as all vessel operating expenses, such as day-to-day operations, maintenance, crewing and insurance, transfer to the charterer’s account.  The owner of the vessel receives monthly charter hire payments on a per day basis and is responsible only for the payment of capital costs related to the vessel.
 
●  
A time charter involves the use of the vessel, either for a number of months or years or for a trip between specific delivery and redelivery positions, known as a trip charter.  The charterer pays all voyage related costs.  The owner of the vessel receives semi-monthly charter hire payments on a per day basis and is responsible for the payment of all vessel operating expenses and capital costs of the vessel.
 
●  
A single or spot voyage charter involves the carriage of a specific amount and type of cargo on a load-port to discharge-port basis, subject to various cargo handling terms.  Most of these charters are of a single or spot voyage nature, as trading patterns do not encourage round voyage trading.  The owner of the vessel receives one payment derived by multiplying the tons of cargo loaded on board by the agreed upon freight rate expressed on a per cargo ton basis.  The owner is responsible for the payment of all expenses including voyage, operating and capital costs of the vessel.
 
●  
A contract of affreightment, or COA, relates to the carriage of multiple cargoes over the same route and enables the COA holder to nominate different ships to perform individual voyages.  Essentially, it constitutes a number of voyage charters to carry a specified amount of cargo during the term of the COA, which usually spans a number of years.  All of the ship’s operating, voyage and capital costs are borne by the ship owner.  The freight rate normally is agreed on a per cargo ton basis.
 
Charter hire rates fluctuate by varying degrees amongst the drybulk carrier size categories.  The volume and pattern of trade in a small number of commodities (major bulks) affect demand for larger vessels.  Because demand for larger dry bulk vessels is affected by the volume and pattern of trade in a relatively small number of commodities, charter hire rates (and vessel values) of larger ships tend to be more volatile.  Conversely, trade in a greater number of commodities (minor bulks) drives demand for smaller drybulk carriers.  Accordingly, charter rates and vessel values for those vessels are subject to less volatility.
 
Charter hire rates paid for drybulk carriers are primarily a function of the underlying balance between vessel supply and demand, although at times other factors, such as sentiment may play a role.  Furthermore, the pattern seen in charter rates is broadly mirrored across the different charter types and between the different drybulk carrier categories.
 
 
36

 
In the time charter market, rates vary depending on the length of the charter period and vessel specific factors such as age, speed and fuel consumption.
 
In the voyage charter market, rates are influenced by cargo size, commodity, port dues and canal transit fees, as well as delivery and redelivery regions.  In general, a larger cargo size is quoted at a lower rate per ton than a smaller cargo size.  Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit.  Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region that includes ports where vessels load cargo also are generally quoted at lower rates.  This is because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.
 
Within the dry bulk shipping industry, the charter hire rate references most likely to be monitored are the freight rate indices issued by the Baltic Exchange.  These references are based on actual charter hire rates under charter entered into by market participants as well as daily assessments provided to the Baltic Exchange by a panel of major shipbrokers.  The Baltic Panamax Index is the index with the longest history.
 
Baltic Exchange Freight Indices
 
(Index points)
The BSI replaced the BHMI on January 3, 2006, although the index has been calculated since July 1, 2005
 
Source: Baltic Exchange
 
 
37

 
The following chart illustrates one-year time charter rates for Handysize, Handymax, Panamax and Capesize drybulk carriers between 1996 and December 2008.
 
Time Charter Rates – 1 Year
 
(US Dollars per Day)
 
Source: Drewry
 
 
In 2003 and 2004, rates for drybulk carriers of all sizes strengthened appreciably in comparison to historical levels as vessel supply and demand were finely balanced.  The main driver of this dramatic upsurge in charter rates was primarily the high level of demand for raw materials imported by China.
 
During 2006, rates stabilized above historically high levels.  In 2007, rates rose to new highs, reflecting the very tight balance between vessel supply and demand.  In 2008, rates remained at comparatively high levels in the first half of the year, but fell sharply from August in the face of weaker demand, rising supply and market perception and are now are market lows.
 
Vessel Prices
 
Newbuilding prices are determined by a number of factors, including the underlying balance between shipyard output and capacity, raw material costs, freight markets and sometimes exchange rates.  In the last few years high levels of new ordering were recorded across all sectors of shipping.  As a result, most of the major shipyards in Japan, South Korea and China have full orderbooks until the end of 2010, although the downturn in freight rates and the lack of funding to the wider global financial crisis will lead to some of these orders being cancelled or delayed.
 
The following chart indicates the change in newbuilding prices for drybulk carriers in the period from 1996.  As can be seen newbuilding prices have increased significantly since 2003, due to tightness in shipyard capacity, high levels of new ordering and stronger freight rates.  However, with the sudden and steep decline in freight rates, secondhand values and lack of new vessel ordering, newbuilding prices have started to decline.
 
 
38

 
Drybulk Carrier Newbuilding Prices
 
(Millions of U.S. Dollars)
 
Source: Drewry
 
 
In the secondhand market, the steep increase in newbuilding prices and the strength of the charter market have also affected values, to the extent that prices rose sharply in 2004/2005, before dipping in the early part of 2006, only to rise thereafter to new highs in the first half of 2008.  However, the sudden and sharp downturn in freight rates since August has had a very negative impact on secondhand values, as the chart below indicates.
 
 
39

 
Drybulk Carrier Secondhand Prices – 5 Year Old Vessels
 
(Millions U.S. Dollars)
 
Source: Drewry
 
 

 
40

 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
 
Our disclosure and analysis in this prospectus concerning our operations, cash flows and financial condition, including, in particular, the likelihood of our success in developing and expanding our business, include forward-looking statements.  Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “projects,” “forecasts,” “may,” “should,” and similar expressions are forward-looking statements.
 
All statements in this prospectus that are not statements of historical fact are forward-looking statements.  Forward-looking statements include, but are not limited to, such matters as:
 
●  
our future operating or financial results;
 
●  
economic and political conditions;
 
●  
our pending acquisitions, our business strategy and expected capital spending or operating expenses, including dry-docking and insurance costs;
 
●  
competition in the seaborne transportation industry;
 
●  
statements about seaborne transportation trends, including charter rates and factors affecting supply and demand;
 
●  
our financial condition and liquidity, including our ability to obtain financing in the future to fund capital expenditures, acquisitions and other general corporate activities; and
 
●  
our expectations of the availability of vessels to purchase, the time that it may take to construct new vessels, or vessels’ useful lives.
 
Many of these statements are based on our assumptions about factors that are beyond our ability to control or predict and are subject to risks and uncertainties that are described more fully in the “Risk Factors” section of this prospectus.  Any of these factors or a combination of these factors could materially affect future results of operations and the ultimate accuracy of the forward-looking statements.  Factors that might cause future results to differ include, but are not limited to, the following:
 
●  
changes in law, governmental rules and regulations, or actions taken by regulatory authorities;
 
●  
changes in economic and competitive conditions affecting our business;
 
●  
potential liability from future litigation;
 
●  
length and number of off-hire periods and dependence on third-party managers; and
 
●  
other factors discussed in the “Risk Factors” section of this prospectus.
 
You should not place undue reliance on forward-looking statements contained in this prospectus, because they are statements about events that are not certain to occur as described or at all.  All forward-looking statements in this prospectus are qualified in their entirety by the cautionary statements contained in this prospectus.  These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.
 
Except to the extent required by applicable law or regulation, we undertake no obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
 
 
41

 
PER SHARE MARKET PRICE INFORMATION
 
Our common stock and warrants have traded on the Nasdaq Global Market under the symbol “SBLK” and “SBLKW” since December 3, 2007.  You should carefully review the tables, for the quarters and years indicated, the high and low prices of Star Bulk common shares and warrants under the heading Item 9. “The Offer and Listing” in our annual report on Form 20-F for the year ended December 31, 2007, which is incorporated by reference herein.
 
The table below sets forth the high and low price history of our common shares and warrants in 2008 and 2009.
 
COMMON STOCK
 
2008
 
High 
   
Low  
 
1st Quarter ended March 31, 2008
 
 
$12.37
   
 
$  9.36  
2nd Quarter ended June 30, 2008
 
 
$14.34
   
 
$11.39  
3rd Quarter ended September 30, 2008
 
 
$11.47    
 
$  6.73  
4th Quarter ended December 31, 2008
 
 
$  7.03    
 
$  1.80  
Six months ended December 31, 2008
 
 
$11.47    
 
$  1.80  
August 2008
 
 
$10.75    
 
$  9.33  
September 2008
 
 
$10.18    
 
$  6.73  
October 2008
 
 
$  7.03    
 
$  3.30  
November 2008
 
 
$  4.23    
 
$  2.03  
December 2008
 
 
$  3.11
   
 
$  1.80  
                 
2009     
 High
      Low    
January 2009
 
 
$  3.34
   
 
$  2.20  
1st Quarter through February 9, 2009    
$  3.34
     
$  2.08
 
 
WARRANTS
 
2008
 High 
   
 Low    
1st Quarter ended March 31, 2008
   
$  4.46
     
$  1.99
 
2nd Quarter ended June 30, 2008
   
$  6.40
     
$  3.70
 
3rd Quarter ended September 30, 2008
   
$  3.74
     
$  1.52
 
4th Quarter ended December 31, 2008
 
 
$  1.50
     
$  0.10
 
Six months ended December 31, 2008
   
$  3.74
     
$  0.10
 
August 2008
   
$  3.24
     
$  2.21
 
September 2008
   
$  2.86
     
$  1.52
 
October 2008
   
$  1.50
     
$  0.40
 
November 2008
   
$  0.85
     
$  0.10
 
December 2008
   
$  0.29
     
$  0.11
 
 
2009
 
High 
   
Low  
 
January 2009    
$  0.25 
     
$  0.14 
 
1st Quarter through February 9, 2009
 
 
$  0.25     
 
$  0.10 
 
 
 
42

 

RATIO OF EARNINGS TO FIXED CHARGES
 
The following table sets forth our unaudited ratio of earnings to fixed charges for the preceding fiscal year ended December 31, 2007 and the nine months ended September 30, 2008.(1)
 
(dollars in thousands)
 
Nine Months Ended
   
Year Ended
 
   
September 30, 2008
   
December 31, 2007
 
Earnings
           
Net income
   
  83,537
     
3,411
 
Add: Fixed charges
   
    5,776
         
                 
Less: Interest capitalized
   
   -
     
       -
 
Total Earnings
   
$89,313
     
3,411
 
                 
Fixed Charges
               
Interest expensed and capitalized
   
    5,629
     
       -
 
Amortization and write-off of capitalized expenses relating to indebtedness
   
       147
     
       -
 
Total Fixed Charges
   
$  5,776
     
       -
 
                 
Ratio of Earnings to Fixed Charges
   
      15.5
        N/A           
 
----------
(1)  We have not issued any preferred stock as of the date of this prospectus.
 

 
43

 
 
 
USE OF PROCEEDS
 
Unless we specify otherwise in any prospectus supplement, we will use the net proceeds from the sale of securities offered by this prospectus for capital expenditures, repayment of indebtedness, working capital, to make vessel or other acquisitions and for general corporate purposes.  We will not receive any proceeds from sales by selling shareholders.
 
 
 

 
44

 

CAPITALIZATION
 
The following table sets forth our consolidated capitalization:
 
●  
on an actual basis, as of September 30, 2008; and
 
●  
on an adjusted basis, as of February 2, 2009 to give effect to (i) the loan installment payments of $10.0 million paid during the fourth quarter of 2008 and the first quarter of 2009 ; (ii) the repurchase of 495,000 shares of our common stock at an aggregate purchase price of $1.7 million; (iii) the payment of a dividend in the amount of $0.36 per common share based on 54,427,400 shares outstanding as of November 28, 2008, consisting of the payment of the cash portion of the dividend in the amount of $9.8 million, and the issuance of 4,255,002 common shares representing the stock portion of the dividend; (iv) the reinvestment of the cash portion of the dividends received by our management and our directors into 818,877 shares amounting to $1.9 million; and (v) the December 5, 2008 grant of an aggregate of 130,000 unvested restricted common shares to all of our employees and an aggregate of 940,000 unvested restricted common shares to the members of our board of directors, all of which shares vested on January 31, 2009.
      
     There have been no significant adjustments to our capitalization since February 2, 2009, as so adjusted.
     
    You should read this capitalization table together with the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in the Report on Form 6-K/A furnished to the Commission on December 3, 2008 and incorporated herein.
 

(In thousands of U.S. dollars)
 
Actual
   
As adjusted(1)
             
Total debt (including current portion)
 
305,000
 
     
295,000
 
                 
Preferred stock, $0.01 par value; 25,000,000 shares authorized, none issued
 
-
 
     
-
 
Common stock, $0.01 par value; 100,000,000 shares authorized 54,652,400 shares issued
and outstanding at September 30, 2008; 60,301,279 shares issued and outstanding as adjusted
 
546
 
     
602
 
Additional paid-in capital
  472,384
 
     
482,058
 
Retained earnings
  47,223
 
     
27,841
 
Total stockholders’ equity
  520,153
 
     
510,501
 
Total capitalization
  825,153
 
     
805,501
 

(1)
The payment of the stock portion of the dividend in respect of the third quarter of 2008 and the issuance of the shares mentioned above in (v) is reflected in the table above based on a share price of $1.80 which was the reported closing price of our common stock on the Nasdaq Global Market on December 5, 2008.
 
 

 
45

 

ENFORCEMENT OF CIVIL LIABILITIES
 
Star Bulk Carriers Corp. is a Marshall Islands company and our executive offices are located outside of the U.S. in Athens, Greece.  A majority of our directors, officers and the experts named in the prospectus reside outside the U.S.  In addition, a substantial portion of our assets and the assets of our directors, officers and experts are located outside of the U.S.  As a result, you may have difficulty serving legal process within the U.S. upon us or any of these persons.  You may also have difficulty enforcing, both in and outside the U.S., judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.
 
Furthermore, there is substantial doubt that the courts of the Marshall Islands or Greece would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws.
 
 
 

 
46

 
 
SELLING SHAREHOLDERS
 
Based solely upon information furnished to us, the following table sets forth the identity and other information about the selling shareholders.  The selling shareholders are offering an aggregate of up to 14,305,599 of our common shares, which includes up to 1,132,500 common shares which may issued upon the exercise of the warrants, and up to 1,132,500 of our warrants which were issued to them in the Private Placement prior to our initial public offering. 
 
The tabular information relating to share and percent of class ownership provided in the table below is based upon information provided to us by the selling shareholders and assumes the exercise of each of the Company’s outstanding warrants. The tabular information below further assumes that all of the shares registered will be offered and sold by the selling shareholders, including shares received upon exercise of the warrants.
 
 
Selling Shareholder
Common Shares Owned Prior to the Offering
Percentage of Class Prior to the Offering (1)
Total Common Shares Offered Hereby
Percentage of the class following the offering
Petros Pappas (2)
9,738,354
16.15%
9,738,354
0%
Prokopios Tsirigakis (3)
2,127,345
3.53%
2,127,345
0%
George Syllantavos (4)
875,703
1.45%
875,703
0%
Koert Erhardt (5)
573,471
*
573,471
0%
Tom Softeland
297,827
*
297,827
0%
Peter Espig (6)
303,452
*
303,452
0%
Christo Anagnostou
152,412
*
152,412
0%
Niko Nikiforos
125,185
*
125,185
0%
Georgia Mastagaki(7)
13,050
*
13,050
0%
John Pektesidis (7)
13,050
*
13,050
0%
George Drakatos (7)
12,500
*
12,500
0%
George Mantalos (7)
10,000
*
10,000
0%
John Telios (7)
7,300
*
7,300
0%
Dimitris Koutsogiannis (7)
6,500
*
6,500
0%
Stamatis Neris (7)
6,350
*
6,350
0%
Litsa Alexopoulou (7)
5,750
*
5,750
0%
Spiros Anagnostakis (7)
5,600
*
5,600
0%
Panagiotis Kourkoumelis (7)
5,450
*
5,450
0%
Despina Savvopoulou (7)
5,100
*
5,100
0%
Miliadis Antonis (7)
4,750
*
4,750
0%
Tassos Chrisostomidis (7)
4,000
*
4,000
0%
Katerina Sofikitou (7)
3,650
*
3,650
0%
Vasilis Lytas (7)
2,700
*
2,700
0%
Stella Tsagari (7)
2,050
*
2,050
0%
Evagelia Spyroglou (7)
1,750
*
1,750
0%
Stratos Pentafronimos (7)
1,400
*
1,400
0%
Matina Karali (7)
900
*
900
0%
 
* less than one percent.
 

 
47

 
 
(1)
Percentage based on 60,301,279 common shares outstanding as of February 2, 2009.
 
(2)
Mr. Pappas, the Chairman of our board of directors, is the beneficial owner of 9,738,354 common shares, consisting of 8,735,854 common shares and 1,002,500 common shares which may be issued upon the exercise of our warrants.
 
(3)
Mr. Tsirigakis, our Chief Executive Officer, President and one of our directors, is the beneficial owner of 2,127,345 common shares, consisting of 2,017,345 vested and 60,000 unvested common shares and 50,000 common shares which may be issued upon the exercise of our warrants.
 
(4)
Mr. Syllantavos, our Chief Financial Officer, Secretary and one of our directors, is the beneficial owner of 875,703 common shares, consisting of 795,703 vested and 50,000 unvested common shares and 30,000 common shares which may be issued upon the exercise of our warrants.
 
(5)
Mr. Erhardt, one of our directors, is the beneficial owner of 573,471 common shares, consisting of 523,471 common shares and 50,000 common shares which may be issued upon the exercise of our warrants.
 
(6)
Mr. Espig, one of our directors, is the beneficial owner of 303,452 common shares, consisting of 228,452 vested and 75,000 unvested common shares.
 
(7)
On December 5, 2008, pursuant to the terms of our Equity Incentive Plan we authorized the issuance of an aggregate of 130,000 unvested restricted common shares to all of our employees.  All of these shares vested on January 31, 2009.
 

 
48

 

PLAN OF DISTRIBUTION
 
We may sell or distribute the securities included in this prospectus and the selling shareholders may sell our common shares or our warrants through underwriters, through agents, to dealers, in private transactions, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices.
 
In addition, we may sell some or all of our securities and the selling shareholders may sell our common shares or our warrants, included in this prospectus through:
 
●  
a block trade in which a broker-dealer may resell a portion of the block, as principal, in order to facilitate the transaction;
 
●  
purchases by a broker-dealer, as principal, and resale by the broker-dealer for its account; or
 
●  
ordinary brokerage transactions and transactions in which a broker solicits purchasers.
 
In addition, we or the selling shareholders may enter into option or other types of transactions that require us or them to deliver our securities to a broker-dealer, who will then resell or transfer the securities under this prospectus.  We or any selling shareholder may enter into hedging transactions with respect to our securities.  For example, we or any selling shareholder may:
 
●  
enter into transactions involving short sales of our shares of common stock by broker-dealers;
 
●  
sell shares of common stock short themselves and deliver the shares to close out short positions;
 
●  
enter into option or other types of transactions that require us or any selling shareholder to deliver shares of common stock to a broker-dealer, who will then resell or transfer the shares of common stock under this prospectus; or
 
●  
loan or pledge the shares of common stock  to a broker-dealer, who may sell the loaned shares or, in the event of default, sell the pledged shares.
 
We or any selling shareholder may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions.  If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions.  If so, the third party may use securities pledged by us or any selling shareholder or borrowed from us, any selling shareholder or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us or any selling shareholder in settlement of those derivatives to close out any related open borrowings of stock.  The third party in such sale transactions will be an underwriter and, if not identified in this prospectus, will be identified in the applicable prospectus supplement (or a post-effective amendment).  In addition, we or a selling shareholder may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell the securities short using this prospectus.  Such financial institution or other third party may transfer its economic short position to investors in our securities or in connection with a concurrent offering of other securities.
 
Any broker-dealers or other persons acting on our behalf or the behalf of the selling shareholders that participates with us or the selling shareholders in the distribution of the securities may be deemed to be underwriters and any commissions received or profit realized by them on the resale of the securities may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended, or the Securities Act.  As of the date of this prospectus, we are not a party to any agreement, arrangement or understanding between any broker or dealer and us with respect to the offer or sale of the securities pursuant to this prospectus.
 
At the time that any particular offering of securities is made, to the extent required by the Securities Act, a prospectus supplement will be distributed, setting forth the terms of the offering, including the aggregate number of securities being offered, the purchase price of the securities, the initial offering price of the securities, the names of any underwriters, dealers or agents, any discounts, commissions and other items constituting compensation from us and any discounts, commissions or concessions allowed or reallowed or paid to dealers.
 
 
49

 
Underwriters or agents could make sales in privately negotiated transactions and/or any other method permitted by law, including sales deemed to be an at-the-market offering as defined in Rule 415 promulgated under the Securities Act, which includes sales made directly on or through the Nasdaq Global Market, the existing trading market for our common shares and warrants, or sales made to or through a market maker other than on an exchange.
 
We will bear costs relating to all of the securities being registered under the registration statement of which this prospectus is a part.
 
As a result of requirements of the Financial Industry Regulatory Authority (FINRA), formerly the National Association of Securities Dealers, Inc. (NASD), the maximum commission or discount to be received by any FINRA member or independent broker/dealer may not be greater than eight percent (8%) of the gross proceeds received by us or any selling shareholder for the sale of any securities being registered pursuant to Commission Rule 415 under the Securities Act of 1933, as amended.  If more than 10% of the net proceeds of any offering of shares of common stock  made under this prospectus will be received by FINRA members participating in the offering or affiliates or associated persons of such FINRA members, the offering will be conducted in accordance with NASD Conduct Rule 2710(h).
 
 
 
 
 
50